World Monitor Mag, Industrial Overview WM_November_2018_WEB_Version - Page 77

additional content management. You need to find ways to evaluate people that recognize the unique role each person has played in moving the organization forward. These evaluations must be based on a growth mind-set: They must recognize that with the right context and conditions, anyone’s abilities can be improved, especially given the expansive, flexible nature of the human brain. The starting point may be educating your company’s leaders about your current performance system, especially if it is based on numerical rankings. Because these rankings are so deeply ingrained in most organizations, and so closely tied to both the fight-or-flight response and the fixed mind-set, you may need to build awareness to get people ready to consider change. Ranking and Its Discontents In theory, a standardized, objectives- based PM system should be a straightforward exercise. It seems logical to set goals, provide feedback about progress during a six- or 12-month cycle, agree at the end of the cycle on whether these goals were achieved, and link an individual’s compensation to the results. It is also clearly easier to manage this approach with a common rating system for all employees. Thus, by the 1970s, most large organizations adopted a rating system to define human performance. Typically, these ranked people on a 1–3 or 1–5 scale. The lowest number denoted an outstanding performer, and anyone with the highest number was a problem employee. Soon, many companies discovered that managers tended to rate everyone in the middle. As one executive from a large food manufacturer (with a 1–5 rating system) explained, “Anything other than a 3 requires extra work for a manager. You have to justify it if you give an employee a 1 or 2, and you have to put the employee in a performance improvement plan if you rank them 4 or 5.” Starting with General Electric in the late 1980s, under Jack Welch’s direction, companies tried to solve this problem by requiring managers to differentiate their people and spread out the ratings on a curve. In this system, known as “forced ranking” (or “rank and yank”), a specific percentage of people had to be ranked at the top and bottom ranges, with their promotions and bonuses affected accordingly. A multibillion-dollar human capital management software industry emerged to support this type of system, which became commonplace in large companies, where it was seen as a consistent way to make rewards match performance. As of 2012, according to the Wall Street Journal, more than 60 percent of Fortune 500 firms still used this approach. trigger a fight-or-flight response in employees’ brains? A neuroscience- based framework called the SCARF model, codified by David Rock, posits that five organizational factors have an immense, but often unnoticed, effect on negative human reactions. These factors are status (the perception of being considered better or worse than others); certainty (the predictability of future events); autonomy (the level of control people feel over their lives); relatedness (the experience of sharing goals with others); and fairness (the sense of being respected and treated equitably, especially compared with others). When an organization’s perceived level of any of the SCARF factors is low, people feel threatened and perturbed. Even if they don’t express it, the feeling is there, and it often impairs their productivity and willingness to show commitment. Yet both managers and employees find these systems dispiriting and exhausting. Kansas State University management professor Satoris Culbertson, who studied the response to more than 200 performance reviews, argues that the mere act of receiving a numerical rating can be perceived as negative feedback, and even people with a growth mind-set don’t react well to negative feedback. “You would think that having so many smart people try thousands of variations of a [ranking] scale over decades, someone would have found the right way to do this,” says Brian Kropp, who leads the CEB human resources practice. “But no one has.” Performance rankings trigger that perturbed feeling in all five ways: 1. Status. People in lower-status positions have been labeled with numbers throughout history, as a way of dehumanizing and demoralizing them. In performance rankings in most organizations today, any number except 1 automatically signifies a lower-status position, with pay levels and promotion prospects to match. People carry that number, and the insult implicit in it, mentally around with them for a year, until their next performance review. As Korn Ferry’s Eichinger says, “Imagine getting a family together, lining all the kids up in a row, and telling them how they rank compared to each other.” Parents wouldn’t do it, because it would make most of the family members uncomfortable—including whoever was ranked at the top. The SCARF Hypothesis 2. Certainty. The process of Why do performance rankings determining how people are rated is supported by EUROBAK 75