Microsoft and Dell are ditching employee performance reviews

October 29, 2015, 4:16 PM UTC
Windows 10: The Next Chapter press event
IMAGE DISTRIBUTED FOR MICROSOFT - Satya Nadella, Microsoft chief executive officer, shares the Windows 10 vision as part of the Microsoft strategy on Wednesday, Jan. 21, 2015. (Ron Wurzer/AP Images for Microsoft)
Photograph by Ron Wurzer — AP Images for Microsoft

The media have begun to notice that several big, famous companies—Microsoft, Dell, Accenture, New York Life, and many more—are abandoning one of the most loathed traditions in management: the performance review. The Wall Street Journal noted the trend a few days ago, and last month the Harvard Business Review and CNNMoney documented it. The theme is consistent: Hallelujah, performance ratings are dead.

And I’d be cheering too, except for one problem. Performance ratings in their multiple forms are tools, and at many companies they’re despised not because the tools are bad, but because the users of the tools are inept. The danger is that leaders may conclude they can improve their organization’s performance by changing the tool when the real issue, a much tougher one, is improving the skills of those who use any tool for helping employees get better.

Everyone’s favorite example in the bad-tool argument is the forced ranking system popularized by General Electric when Jack Welch was CEO: Every employee every year had to be placed in a category—high, middle, or low (the exact definitions of which changed as the system evolved)—and had to be told where he or she stood. Many companies adopted the system when GE was flying high, and many of them had terrible experiences. Some employees were furious at how they were ranked, and some felt the system pitted them against one another: For me to be moved into a higher category, someone else must be moved out. Microsoft used the system until two years ago, and employees rejoiced when the company dumped it.

At that time, I asked Dave Calhoun about it. A former GE executive, he was CEO of Nielsen and a fan of the system, which he used at Nielsen. His response was simple: The whole point “is to force a conversation,” he said. Many managers absolutely hate to tell employees, rigorously and honestly, where they stand. This is a way of making them do it. He had no quarrel with other means of making them do it—but experience has shown that if you give managers a half-inch of wiggle room to avoid giving employees an honest assessment, most of them will use it. In which case employees never know how they’re really doing and have a far less chance of improving.

Many of the companies that are ditching the old rating systems are finding other ways to force that honest conversation. Adobe, for example, has attracted much attention with its “Check-In” system that requires feedback often, not annually. Other companies are adopting it.

In this as in so much else, the real issue for leaders is culture. In your organization, is it culturally okay to be candid about performance, whether speaking upward, downward, or sideways? If so, your organization is probably an excellent performer. If not, then nothing else in the company will work well. Regardless of the evaluation tool being used, the culture needs changing. And change starts at the top.

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