Dialogue@Work

The latest thinking on dialogue and its critical influence on organisational performance

The Rise of the Naked Manager

From annual appraisal to on-going conversation

Summary

“As of September one of the largest companies in the world will do all of its employees and managers an enormous favour; it will get rid of the annual performance review.” Washington Post

When Accenture recently announced its plan to scrap annual reviews this enthusiastic response was typical.

Accenture is joining a small but fast-growing list of major corporations – including Deloitte, GE, Microsoft, Adobe, Gap and Medtronic – who have recently been in the headlines for scrapping and re-designing their performance management systems.

In this article we explore what lies behind this trend and introduce the concept of the Naked Manager – a phenomenon that the end of annual reviews is helping to create.

The end of an era

“If performance review (as usually done) was a drug, it wouldn’t be approved because it’s so ineffective and it has such vile side effects.” Robert Sutton, Stanford

It looks like time is up for the annual appraisal.

According to research firm CEB, 6% of Fortune 500 companies had scrapped their systems of forced rankings and annual reviews by the start of 2015; up from 3% in 2013, and 1% in 2012.

Based on our experience over the past year, what was a tentative trend is rapidly turning into a stampede. Organisations in all sectors are following their example. Our workshops and seminars on the subject have been packed with organisations that plan to get rid of annual appraisals.

What has been a standard practice in almost every major organisation for half a century or more is about to disappear.

Why the change?

With hindsight, given the universal criticism of annual appraisals, it is more surprising that they lasted so long than the fact that they are now being replaced.

Though many major companies still haven’t taken the leap, most are aware that their current systems are flawed. CEB found that 95% of managers are dissatisfied with the way their companies conduct performance reviews and more than 90% of HR leaders say the process doesn’t even yield accurate data.

Academics and business leaders have criticised the annual appraisal for years. Managers and employees alike have complained year after year. The response in most organisations has been incremental reform. This has usually succeeded in making systems progressively more complex, but left the fundamentals untouched; the bell curves, forced ratings, rank and yank and skewed bonus schemes that made them so unpopular in the first place. The painful ritual of the annual appraisal meeting – the low point of the year for many – has continued to be endured by managers and employees alike.

Attempts to incrementally reform systems ignored a weight of evidence showing that the whole approach was flawed. It did not work. It did not help to manage or identify high performance and was actually counter-productive.

It is impossible to sum up a person’s annual contribution in a single number rating from 1 to 5. In any balanced team people make varied contributions that are often highly valued by their bosses, but do not necessarily meet the criteria set by the organisation for ‘top performance’. Assessment of human performance is by its very nature subjective.

“Performance ratings detract from the conversation. If an employee is sitting there waiting for the number to drop, they are not engaged in the conversation, at best. At worst it can actually make them angry and disaffected for a period up to a year” Caroline Stockdale, former Chief Talent Officer, Medtronic.

Ironically, one of the reasons that business leaders persist with ranked performance evaluation is the belief that workplaces should be meritocratic – so that high performers should receive greater rewards than average or low performers.

This is linked to a widely held assumption that competition for financial rewards drives up average levels of performance – and that competition is further stimulated when ‘rank and yank’ penalises low performers.

Companies, including Microsoft and GE who previously evangelised the approach, have recently dropped ranking and switched from individual to team based bonuses. They recognised that excess competition erodes cooperation, and organisations today are dependent on cooperation. A senior manager at Microsoft made the observation that the company was; “competing with ourselves rather than the competition”.

Excessive internal competition, driven by the performance management system creates a ‘dog eat dog’ culture.

Why has it taken so long for organisations to act?

The simplest answer is institutional inertia. ‘It might not be perfect, but we’ve always done things this way’ – and this is reinforced by the idea that ‘everyone has these kind of systems, so it must be best practice’.

The evidence that traditional systems do not work has been given new urgency because these cumbersome and bureaucratic systems suddenly look completely anachronistic. In workplaces that have moved on from traditional command and control hierarchies to ones that value teamwork, collaboration and matrix style management, performance edicts from on high are a terrible fit.

In addition a process based on delivering annual or bi-annual feedback is fast becoming an embarrassment and a liability for companies that want to attract and retain young employees, who want more regular feedback expect to be coached.

People we speak with cite three factors that have finally tipped the scales against annual appraisal.

  1. Timely feedback

  2. All the theorists tell us that people learn when feedback is delivered promptly and specifically; not when it is delivered up to a year later. People can get feedback in seconds now via technology, making annual performance appraisals increasingly ridiculous and out dated.

    “In a fast-moving company like Superdry, priorities change weekly. If someone is working on opening a store in Italy, then France is no longer the priority, so objectives can quickly become irrelevant. In agile firms, it’s about developing people to do a good job; it must be continual.” Andrea Cartwright, HR Director,Supergroup plc
  3. Cost

  4. Organisations have analysed the running costs of their performance management systems, and understandably, they want to improve the ROI.

    At Adobe the annual review required 80,000 hours from the company’s 2,000 managers – the equivalent of 40 full time employees per year. Deloitte was spending 2 million hours per year on unproductive activities related to performance reviews – training on new software and process updates, paperwork and actually delivering performance appraisals. CEB estimates that a company with 10,000 employees spends about $35m per year.

  5. Motivation

  6. Companies are starting to accept all the anecdotal evidence that their systems undermine motivation and morale. Internal surveys reveal that employees feel less inspired and motivated after the round of annual appraisals, and that staff turnover increases.

    “These are large-scale, complex systems for making people unhappy.” Kevin Murphy, HR consultant

What next?

Scrapping annual appraisals removes a major time-waster and de-motivator at one fell swoop. However, just getting rid of them does not guarantee improved performance management. Reaping the benefits depends on what replaces them, and how the change is managed. Reform involves much more than replacing one process with another.

Genuine performance management – getting the best out of people and developing their potential – is almost the definition of leadership.

“The art of leadership is not to spend your time measuring and evaluating.” Pierre Nanterme, CEO Accenture

Scrapping annual performance evaluation is an opportunity to develop a much more effective leadership style as a whole.

Successful performance management depends on the regularity and quality of performance conversations; and the format of an annual appraisal almost ensures that managers and employees fail to engage in genuine or constructive conversations.

“Most people simply think they perform better than other people. Unless you rate someone in the highest category, the conversation shifts away from feedback and development to justification” Mary Jenkins, HR consultant and co-author Abolishing Performance Appraisal

It is clear that most annual appraisals are not authentic conversations. They happen because they have been mandated, not because the manager has a genuine interest in talking to employees or hearing their views, and not because employees have requested feedback or have some input they want to make. Conversations in annual appraisals are simply rituals.

The key objective for organisations that scrap their annual appraisals is aim to replace them with more authentic conversations. At Adobe these are called Check Ins – they have no prescribed format or frequency and managers do not complete any forms to document what happens – they just talk.

The Rise of the Naked Manager

However, whilst replacing annual appraisals and delegating responsibility to local managers may increase the opportunity for genuine performance conversations, this outcome is not a foregone conclusion.

In reality, many managers use the appraisal process as a fig leaf.

They might criticise and dislike annual appraisals, but they hide behind the structured agenda and tick box ritual of the meetings to avoid ‘difficult conversations’. Then they blame the system.

We need to recognise that this is a human trait – in life as well as at work. We want to avoid the emotion involved in telling someone bad news. We are hardwired to avoid conflict. Telling colleagues that their performance is not up to scratch can definitely be considered a ‘difficult conversation’. Too many people chicken out; avoiding the conversation all together or failing to explore the issues.

“Everyone in the organization expects and wants underperformance in others to be addressed. We need to find the courage to have the difficult conversations.” Joel Le Goffic, Director of HR Operations, DS Smith

Asking managers to engage in less structured and more personal conversations represents a major change in many organisations.

It leaves many managers feeling naked.

At root, performance management is about building productive relationships and personal development – for both managers and employees. It is not about continuous surveillance and control.

For less formal performance management to succeed, managers need training and support. Unlike the current situation this should not focus on using the process, but on developing their personal conversation skills. Line managers need the confidence to deal constructively with conflict, to de-fuse defensive reactions, and to explore difficult issues constructively, so that people are able to learn and develop.

In conclusion

Few would disagree that getting rid of annual appraisals is a good thing in its own right.

Furthermore, shifting to an approach that depends on regular informal conversations has the potential to improve much more than the performance management system. These conversations have the potential to serve as a starting point to improve the quality of leadership and to build stronger relationships at every level of an organisation – leading to improved collaboration, innovation and employee engagement.

But it will leave many managers feeling unsupported and ‘naked’ which means any change requires a corresponding investment in training and education.

“It is line managers who build engagement and a high performance culture, one employee and one conversation at a time.” Towers Perrin report; Turbo Charging Employee Engagement, 2010

Download a pdf of this article

Classic Texts

In this edition we review another classic text in the field of organisational dialogue. Megan Reitz’s Dialogue in Organisations – Developing Relational Leadership.
read more →

“This team sucks the life out of people…”

How paying attention to the way a team talks can increase honesty and openness – for a while at least!
read more →

Client Update

What do Virgin Trains, The National College of Policing and The Prime Minister's Office in Dubai all have in common? They have all recently engaged The Right Conversation to improve the quality of dialogue in their organisations…
learn who else we have been working with →

Talking Points

Difficult Conversations workshops – Dubai

In conjunction with Ashridge Business School, we recently ran a very successful series of workshops in Dubai for the Prime Minister’s Office on the subject of How to Have Difficult Conversations. See the 5 Super-skills of Effective Conversations →

Workshops – is it time to scrap the annual appraisal?

We have co-hosted three workshops recently on this most topical of subjects, all of which were complete sell-outs. For information on similar upcoming events (including in Dubai and South Africa). Contact →

What happens when dialogue breaks down?

In the wake of the recent emission scandal at VW, there is emerging evidence that an authoritarian leadership style may have played a significant part in what happened. More →

Previous Newsletters

Spring 2015
July 2014
March 2014
December 2013
September 2013

Comments and feedback

We welcome comments and feedback and would be delighted to hear your views and opinions.
Click here to let us know what you think

A reflective review of Dialogue in Organisations – Developing Relational Leadership by Megan Reitz (Palgrave Macmillan, 2015)

In this review I am going to pay attention to the insights into dialogue that Megan provides and her central concern with paying attention to the actual moment of encounter between people. This focus on the moment in and of itself means Megan pays exquisite attention to how people connect with, speak with and listen to each other – an attention that is easily overlooked by our habitual fixation with busyness.

This habit of busyness shows itself in people’s inability to step away from the comfortingly familiar conversational patterns, where being fast and efficient predominate, as one of her collaborative group noted: “…when I’ve tried to initiate dialogue… I get a sense… from my management team, of impatience” (P80). Even worse, “…there is a fundamental deep assumption that dialogue, given our busyness, is a “‘luxury’” (P92) and this creates a situation where we become incapable of any meaningful reflection: “…

So what need does this busyness meet? When we step out of the overwhelming focus on task and activity, we step into a fundamental existential fear, the “fear of pointlessness” (P98) which in turn brings to our attention the reality of our own individual vulnerability, a “felt sense of riskiness involved in disclosure… the fragility that appears to be common ‘under the surface’ for many of us” (P135).

Megan challenges the notion that dialogue is about inter-personal niceness, “dialogue is not some sort of perfect interaction characterised by consensus. It can be challenging… and dangerous” (P127). Taken seriously dialogue can be seen as “possible response to the alienation and objectification… commonly experienced in organisations” (P176).

In her final few paragraphs she offers the following thoughts about what her book is for and about: “… it’s a passionate plea for organisations to inquire into how people meet – or not… how amazingly fragile we are as individuals… our need to be confirmed by others” (P239). And what hinders dialogue is a dangerous fantasy, “that we operate as individual beings as opposed to being very, very common and the same” (P240).

Her book closes with a fearful expression that we are headed in a bad direction, in terms of human thriving, in terms of opportunities for people to really turn to each other in the moment: “I just don’t see us getting closer in our organisational settings to encountering and appreciating and marvelling in each other… I see so many things that are leading away from the space where we [can meet each other in dialogue” (P240).

If you want to understand what lies beyond the popular techniques and rules of good communication in organisations, I cannot recommend this book highly enough. It invites us to look at the reality of work where we do everything we can not to be present in the moment with each other, where we try to regulate and predict every experience, and Megan offers insights into what it would take to be different. To really turn to each other in the moment is not something that can be boiled down into simple prescription, it is profoundly uncomfortable for people who want the world to stay in its instrumental box, but it is the only way to go if we are to create organisations that respond to actual rather than imagined human needs.

Dialogue in Organisations – Developing Relational Leadership, Palgrave Macmillan, 2015 by Megan Reitz

by John Higgins, Research Director of The Right Conversation

“This team sucks the life out of people…”

How paying attention to the way a team talks can increase honesty and openness – for a while at least!
read more →

The Rise of the Naked Manager

From annual appraisal to on-going conversation
click here →

Client Update

What do Virgin Trains, The National College of Policing and The Prime Minister's Office in Dubai all have in common? They have all recently engaged The Right Conversation to improve the quality of dialogue in their organisations…
learn who else we have been working with →

Talking Points

Difficult Conversations workshops – Dubai

In conjunction with Ashridge Business School, we recently ran a very successful series of workshops in Dubai for the Prime Minister’s Office on the subject of How to Have Difficult Conversations. See the 5 Super-skills of Effective Conversations →

Workshops – is it time to scrap the annual appraisal?

We have co-hosted three workshops recently on this most topical of subjects, all of which were complete sell-outs. For information on similar upcoming events (including in Dubai and South Africa). Contact →

What happens when dialogue breaks down?

In the wake of the recent emission scandal at VW, there is emerging evidence that an authoritarian leadership style may have played a significant part in what happened. More →

Previous Newsletters

Spring 2015
July 2014
March 2014
December 2013
September 2013

Comments and feedback

We welcome comments and feedback and would be delighted to hear your views and opinions.
Click here to let us know what you think

“This team sucks the life out of people…”

How paying attention to the way a team talks can increase honesty and openness – for a while at least.

The following is based on a true story, although a lot has had to be disguised – because this is a truth that would be uncomfortable if it went public.

I was working with a group a while back when the statement in the title of this blog turned up. There were eight members of an executive Board in the room and we were trying to make sense of what had been going on for them during a merger process in the last year – and how the next year could be better.

As usual I wanted to bypass the normal rules of politeness and people’s considerable skill at saying what was expected of them, so I invited them to express their personal experience using images (after we’d had the normal round of polished power point presentations which highlighted all that had been achieved and the wonderfulness of their performance). I asked them “what has it been like, being you in the last year?” A different story always leaks out when I get people to do this, there’s more energy, more angst, more passion; a whole load more richness and colour.

As the group examined each other’s handiwork someone read out a phrase that had been written in bold black marker pen next to a black and white picture of a standard corporate meeting with bored and strained looking people round the table. “This team sucks the life out of people….”

There was a second or two of silence.

“Who wrote this?” demanded the CEO, in a voice that felt punitive and laced with threat to me – and almost certainly was to whoever had dared to express this unacceptable opinion.

“It was me”, said one of the guys, holding up his hand, every inch the naughty schoolboy.

The rest of the team began to pile in.

“No way! That’s rubbish”, said one.

“How can you say that? That’s not right at all”, insisted another.

“Time out!” I called.

These are the critical moments in the life of a team when the norms of what can and can’t be said become visible. In my book Dialogue in Organizations; Developing Relational Leadership, I explain how in these sorts of moments the ‘rules of the game’ are constructed. Often unconsciously in these moments we work out what can and can’t be done and what can and can’t be said. I knew that what happened next in this group was critical; the response of the team to this act of speaking up and expressing challenging views would communicate either acceptance or rejection. I’d worked with this group for long enough, and with a robust enough remit, to have the licence to call them to account and get them to notice what they were doing – and give them the opportunity to do something different. So it was that we were able to talk about what happens when someone says something that could be felt as by others to be act of disloyalty – that could put that individual’s future within the group in jeopardy.

Certainly the phrase: “This team sucks the life out of me” could have been better phrased, but so could the response from the rest of the group. Rather than responding with the spirit of a witch-hunt, the others could have instead become curious about this reality of one of their members. In this instance, with me in the room to notice and hold them to account, the conversation was able to step out of its normal pattern of burying unpopular opinion and rushing on to the identification of actions to be take after the meeting. Instead the group had the insight that change happens in the moment, so for twenty minutes the team talked about the shadow as well as the light of being who they were. They discussed what lay behind this person’s disaffection and found that they were not alone in feeling this way – although, and this is not unusual – the people who were most surprised to find that not everyone was happy were the most senior within the team.

A new pattern of conversation, a new way of belonging to the team, had emerged – or so I thought. What counted as truth and how power mediated what could and couldn’t be said had shifted. There was a small chink of light, which indicated that “it might just be ok to disagree, to challenge, to disclose something about how I feel in this group”.

And then I overheard two members leave at the end of the meeting: “Of course nothing will change”, one said and the other nodded in agreement. They were gone before I could get hold of them and show them the irony that of course nothing would ever change, if they went around telling themselves and everyone else that nothing would change. Changing the way of working in this team was as simple, and as challenging, as deciding to do something slightly different in this next moment. Deciding to take responsibility for the nature and quality of conversations. Deciding to notice their own complaining and transform it into experimenting with different responses. But of course this takes mindfulness and practice. And I will try again in the next workshop….

By John Higgins, Research Director, The Right Conversation and Dr Megan Reitz, Ashridge Business School

John and Megan are currently leading a major research programme looking into “How Truth Speaks to Power”. If you would like to find out more please contact us on info@therightconversation.co.uk

The Rise of the Naked Manager

From annual appraisal to on-going conversation
click here →

Classic Texts

In this edition we review another classic text in the field of organisational dialogue. Megan Reitz’s Dialogue in Organisations – Developing Relational Leadership.
read more →

Client Update

What do Virgin Trains, The National College of Policing and The Prime Minister's Office in Dubai all have in common? They have all recently engaged The Right Conversation to improve the quality of dialogue in their organisations…
learn who else we have been working with →

Talking Points

Difficult Conversations workshops – Dubai

In conjunction with Ashridge Business School, we recently ran a very successful series of workshops in Dubai for the Prime Minister’s Office on the subject of How to Have Difficult Conversations. See the 5 Super-skills of Effective Conversations →

Workshops – is it time to scrap the annual appraisal?

We have co-hosted three workshops recently on this most topical of subjects, all of which were complete sell-outs. For information on similar upcoming events (including in Dubai and South Africa). Contact →

What happens when dialogue breaks down?

In the wake of the recent emission scandal at VW, there is emerging evidence that an authoritarian leadership style may have played a significant part in what happened. More →

Previous Newsletters

Spring 2015
July 2014
March 2014
December 2013
September 2013

Comments and feedback

We welcome comments and feedback and would be delighted to hear your views and opinions.
Click here to let us know what you think