Why your performance management system might not be working

Does your performance management system say more about you than your employees?

Why your performance management system might not be working
The fundamental purpose of performance management is to assess and review your employees’ effectiveness, and ultimately their contribution to the business – but does your system really reflect the employee or the person assessing them?

The most comprehensive research conducted on what performance management systems actually measure says that rating an employee tends to reveal more about the person rating them than the employee themselves.

The study - in which 4,492 managers were rated on certain performance aspects by two bosses, two peers, and two subordinates - revealed that 62% of the variance in ratings could be accounted for by the raters’ individual differences of perceptions.

The research, which was conducted by Michael Mount, Steven Scullen, and Maynard Goff, and published in the Journal of Applied Psychology, found that actual performance accounted for only 21% of the variance in ratings.

On the back of these results, the researchers said: “Although it is implicitly assumed that the ratings measure the performance of the ratee, most of what is being measured by the ratings is the unique rating tendencies of the rater.

“Thus ratings reveal more about the rater than they do about the ratee.”

So where does this leave the traditional performance management system?

A 2015 report from accountancy firm Deloitte, Reinventing Performance Management, also examined the results of the research, as part of a radical overhaul to the company’s performance management system.  

The report suggested that the best person to judge an employee’s performance is the immediate team leader, but questioned how this could work alongside the findings of the research.

It asked: “how [can] we capture a team leader’s view of performance without running afoul of what the researchers termed “idiosyncratic rater effects?”

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