In a new Fistful of Talent article, Paul Hebert reminded us of the buyer’s remorse in companies that took a premature leap into eliminating performance reviews. He reinforced the argument we made a year ago, that the focus should be on managerial talent.
According to a CEB Global study, eliminating reviews produced declines in performance, conversations 
between employees and managers, satisfaction with pay, and employee engagement. The impact on discussions is both in quality and time. Dissatisfaction with pay arose because managers couldn’t explain the rationale for compensation1. The “ready, fire, aim” approach to organizational change hasn’t worked.
A year ago, we wrote that talented leadership improves performance and the way we select and develop managers is at the center of performance and engagement. The problems in performance management are not created by software or the evaluation process. They result from unsound practices in selecting, developing, and supporting the people who manage the process.
Gallup’s State of the American Manager study reported that only 10% of people have the inherent talent to manage others, and 82% of current managers do not have the talent required for their role.[2] Too many new managers are selected based on performance as an individual contributor on the assumption that anyone can manage people.
Even when organizations choose the right people for leadership, they too rarely give them the support they need to succeed. In a CareerBuilder survey, almost 60% of new managers said they were not trained at all for their new roles.[3]
New managers face significant challenges. They often take on a leadership role with little or no reduction in their requirement to produce as an individual contributor. They face a harrowing transition to a new mindset. If we want to improve engagement, productivity, and performance, the place to start is with front-line managers.
- Hire talented managers. Performance as an individual contributor does not guarantee performance as a leader. In an age when we have the tools to assess capabilities and mindset of people before we hire them, it makes sense to apply the same discipline to internal promotions as external hires. We should reward and compensate top performers but should not make them managers if they don’t have the talent to lead. A career advancement path for individual contributors would be a small price to pay for talented leadership.
Companies that hire managers based on talent realize a 48% increase in profitability, a 22% increase in productivity, a 30% increase in employee engagement scores, a 17% increase in customer engagement scores and a 19% decrease in turnover. - “State of the American Manager.” Gallup, 2016.
- Understand the challenges new leaders face. Transition to the new role requires a radical shift in thinking, working, perception of self, and perception of others. They will face unsettling changes in personal relationships as they transition from peer to leader.[4]
- Don’t leave them alone to sink or swim. Every new leader needs supportive peers and a mentor to help them work through transitions. If you provide team training, don’t exclude team leaders from the learning experience.
- Start development early and continue developing leaders forever. Many of the competencies' leaders need take months or years to develop. It’s never too early to start.
We agree that the performance review process for most organizations needs to change. Before you embark on the transition, we recommend you first take a hard look at how you select, develop, and support your front-line leaders.
References:
1. "Removing Performance Ratings is Unlikely to Improve Performance." CEB Global. May 12, 2016.
2. "State of the American Manager." Gallup, Inc. Accessed March 03, 2016.
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