Ditch the Ratings?

Two years ago Medtronic Inc., a medical device technology developer and manufacturer, scrapped its performance management system. It discarded the ratings that assigned employees a number between one and five, the bell curves that mandated how many of a specific number a manager could hand out, and the annual stack of paperwork for human resources leaders, line leaders and employees to write and review.

“Managers spent a lot of time gaming the system; employees spent a lot of time on their creative writing to make their self-appraisals stand out,” said Jan Erickson, vice president of human resources and global talent management for Medtronic. “On top of that, we had a performance management system, an individual development planning system and reward system, and they weren’t as integrated or aligned as we would have liked.”

Erickson and her team simplified the system. They instituted a quarterly performance acceleration process focused on forward-looking goals. It has no ratings and includes a one-page summary sheet, with the annual review still documenting the prior year’s performance. The company moved away from competitive assessments to providing regular feedback, development and coaching to employees.

“At first discussions focused on something we called ‘start, stop and continue’ — what employees should start, what they should stop and what they should continue doing,” Erickson said. “Based on feedback from managers and employees, we found out that wasn’t the easiest way to communicate results, and have since changed the discussion to focus on strengths and areas for development.”

Despite managers’ initial concerns, employee engagement surveys and focus groups show employees, managers and HR leaders are more satisfied with the new process. According to an article published in February in the Washington Post, Medtronic’s managers’ increased freedom in the process has led to double the average merit increase for the company’s top performers.