World Monitor Mag, Industrial Overview WM_November_2018_WEB_Version | Page 77

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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
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