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- A hybrid “third way”
The U.S. military created merit-rating system to flag and dismiss poor performers.
The Army devised forced ranking to identify enlisted soldiers with potential to become officers.
About 60% of U.S. companies were using appraisals to document workers’ performance and allocate rewards.
Social psychologist Douglas McGregor argued for engaging employees in assessments and goal setting.
Led by General Electric, companies began splitting appraisals into separate discussions about accountability and growth, to give development its due.
Inflation rates shot up, and organizations felt pressure to award merit pay more objectively, so accountability again became the priority in the appraisal process.
Jack Welch championed forced ranking at GE to reward top performers, accommodate those in the middle, and get rid of those at the bottom.
McKinsey’s War for Talent study pointed to a shortage of capable executives and reinforced the emphasis on assessing and rewarding performance.
Organizations got flatter, which dramatically increased the number of direct reports each manager had, making it harder to invest time in developing them.
Kelly Services was the first big professional services firm to drop appraisals, and other major firms followed suit, emphasizing frequent, informal feedback.
Adobe ended annual performance reviews, in keeping with the famous “Agile Manifesto” and the notion that annual targets were irrelevant to the way its business operated.
Deloitte, PwC, and others that tried going numberless are reinstating performance ratings but using more than one number and keeping the new emphasis on developmental feedback.
FROM “THE PERFORMANCE MANAGEMENT REVOLUTION,” OCTOBER 2016©HBR.ORG