Research from the NeuroLeadership Institute suggests there is a better way to gauge employee performance than the traditional ratings approach, according to a recent article by Wiliam Atkinson. The Institute studied 52 mid-sized and large companies (primarily in the technology, business-services and consumer-goods sectors) that have removed performance ratings from their performance-management strategies. The report, titled Reengineering Performance Management: How Companies are Evolving PM Beyond Ratings, noted that this is the first global study of companies that have done so.

These are companies that now have their managers focus their performance-management meetings on topics related to growth and development opportunities for the employees, rather than on ratings-centric (e.g.: "You rate a 3 out of 5 in this area") discussions.

According to the article, the traditional way of using numerical ratings during performance reviews has two major problems. First, it doesn’t work. Ticking a box isn’t managing an employee’s performance for the year. Second, employees hate it. Objective numerical ratings don’t remove management bias. Managers are biased – with or without the numbers.

Most of the companies in the study utilize an organized structure, such as recommending to managers how often to speak to employees about performance and what topics to cover. They maintain a “pay-for-performance” strategy (separating rewards conversations from performance conversations), as well as focusing on goal-setting and asking managers to determine if goals were achieved.

The concept is gaining popularity. WorldatWork is also seeing a shift in the direction of non-ratings-centric performance reviews.

Read the full article to learn how to initiate a similar transition in your organization as well as examples of two companies – Microsoft and Cigna – who have made the transition.

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