Sachin Bansal, one of the founding members and former CEO of Indian e-commerce giant, has recently cited performance issues as the reason he had to step down as the CEO back in January. He is currently the Executive Chairman of Flipkart. This statement came in a recent Flipkart’s town hall meeting where Sachin addressed its employees and gave them an insight into the impact that troublesome business conditions has on the organizational structure of the company. Stressing the point that such business conditions have an impact across the various leadership level of the company, Sachin Bansal’s statement comes in light of recent layoffs that company has witnessed in recent months. With Sachin Bansal citing ‘performance’ issues that led to his removal as the CEO of the ecommerce giant back in January, the conversation on performance management systems is worth revisiting. 

Companies today are in at different stages in their relationship with the traditional performance management systems—the periodic review system and its reliance on the bell curve— to assess employee productivity. Some companies, such as GE and Microsoft that have for long stood by their “rank” approach, today are removing their annual systems for rating and evaluating employees and actively replacing them with new ideas that give them continual feedback and coaching. Companies like Netflix no longer uses annual objectives to measures the efficiency of its people. This has been in response to their businesses becoming more agile creating such objective to become more fluid and hence can change quite rapidly. Google too has transformed the way it compensates high performers at every level. Many tech companies are automating evaluation activities that managers elsewhere perform manually.

This shift today is primarily driven due to two reasons today. 

Cumbersome process 

This shift away from traditional performance review processes has been partly due to the bureaucratic nature of such processes; making performance management and review systems cumbersome. Managers and staff alike too, often view these rigid performance management systems as time consuming, excessively subjective, demotivating, and ultimately unhelpful in some cases. In such cases, it does little to improve the performance of employees. It may even undermine their performance as employees struggle to keep up with ratings, worry about compensation, and try to make sense of performance feedback. 

Dynamic business ecosystem

The other common feature among most companies today are willing to relook their performance reviews is that they currently at the helm of undergoing transformation due to evolving business conditions.  As more and more companies enter the realm of business disruptions, employee KPIs require to be agile and more fluid to be able to respond to changing business needs. Leaders across industries might argue about the degree of fluidity but the need to make KPI responsive to the evolving business needs of the company would soon become a business imperative. Following a continual performance management system which focuses more on feedback sessions to improve rather than waiting an entire year to assess employee 

But is this shift towards a new system of employee reviews any better than the old? 

The Economist in an article recently pointed out that such shift employee management systems is at best an attempt to revamp the existing models to meet business needs. These systems do little to remove the structural gaps inbuilt in an employee performance review system. For example In the new system of ‘one size fits one approach’ often doesn’t yield the expected result as measuring performance needs to be done using a standardized yardstick, which in turn is built around taking assessing people against their peers, the article points out. There is still room for subjectivity and manager’s bias can still figure in the final equation. 

This is not to say that the progress companies have made in the field performance management is of no use.  The evolution of such systems has been the result of a culmination of certain forces, both internal and external to the company. These have been what one can call ‘the initial results’ of HR leaders introspecting on the efficacy of their performance measurement models and hence attempting to create something more meaningful for their companies. But it should not end here.  It is now important to ensure that the claims of such systems of being all about “speed, agility, one-size-fits-one and constant learning” is not simply jargon but can actually be executed to help employees perform better. 

The argument today needs to move ahead of whether annual review systems are effective or not. Rather HR professionals across the board need to aim at creating a rational, fair and consistent approach which tries to address gaps rather than just focusing on the short run.  HR leaders have many case studies in front of them to pick and choose in order to build a fresh new system that actually helps employees learn and grow. Rather than focusing on jargons, companies require HR professionals to rethink their present performance management systems and create something which is contextual to the company and beneficial to the employees.