The current audit culture has had an unexpected impact on performance management: ‘assessment’ has developed a bad rep, and the idea of formally ‘evaluating’ employees is losing its appeal.
Organizations like Netflix and Microsoft have abandoned annual reviews altogether, opting instead to treat performance management as a continuous process built upon a strong coaching culture.
On the surface, this seems ironic. Nearly all other aspects of most organizations rely heavily on big data and show a quantification bias in pursuit of ‘objectivity’ and ‘certainty’ as they set strategy, make investments, and take risks. How can organizations with a love for counting forgo the opportunity to measure their biggest investment – talent?
Of course, they aren’t. What looks like a move away from measuring, is in fact an expansion of how, what, and when we measure. Netflix and Microsoft haven’t forsaken the quantitative; they’ve broken tradition by making the integration of big (quantitative) and thick (qualitative) data routine.
Let’s look at the two critical components of assessment-free talent management:
Development is treated a continuous process, propelled by a strong coaching culture
Talent is about value generation, not expertise
Talent Doesn't Hibernate.
An organization is a living organism, not bound to the goal-setting and appraisal seasons arbitrarily assigned by HR. While a temporal approach to performance management might help ‘keep track’ of talent cycles, the talent does not hibernate between seasons. Without investment, however, talent can (and will) become stagnant. Potential remains untapped and valueless if it is not mined and cultivated.
By shifting toward a continuous view of development, organizations can access the benefits promised by formal performance appraisals, but without formal assessment:
Accurate line of sight into strengths and growth opportunities at the individual, team, and enterprise levels
Real-time address of skill and performance gaps
Access to hidden talent
Direct observation of where and how value is being generated
People engagement and empowerment driven by reciprocity (people <->organization)
You might read this and think, “pfft, none of that has ever come from our performance evaluations…[insert disparagement of 360° assessments]”.
Except the lack of insight offered by traditional performance assessments is not a function of using assessments; but the organization’s seasonal treatment of performance. If you threw out the assessments and coached only once or twice a year, you would not be any further ahead.
Talent becomes an ROI generator when performance is continuously improving, and when strengths and growth opportunities can be addressed in real-time.
Regardless of whether formal assessment is in your suite of performance management tools, therefore; talent will not generate ROI unless development is treated as a continuous process; when coaches are intimately engaged with their people, when the organization has direct, real-time line of sight into strengths and growth opportunities, and the infrastructure (i.e., a coaching culture) to respond.
Talent is about value generation, not expertise.
Under traditional systems of performance management, “optimizing” talent involves annual reviews of high-scoring performers, applications of the nine-box or another ranking tool, and pipeline planning to keep high potentials (top talent) engaged. In these environments, critical roles are typically based on hierarchical position, and the risk of high potentials becoming bottlenecked along a career path is palpable.
Talent and potential stagnate, and ROI is stunted.
Alternatively, value-based talent management looks at organizational roles as value generators or value supporters, with varying degrees of directness.
“Critical roles” are based on the value they generate or support, and over 60% of these are found 2-3+ levels below executive leadership.
Roles are considered “critical” relative to organizational direction and are subject to shifts as the organization evolves (e.g., changes in strategy may prioritize/deprioritize value generated from certain areas of the business).
Value-based talent management enables an agile approach to talent that places the highest value resources (i.e., individuals who generate value, regardless of expertise or role) into the highest value-generating roles.
Talent is optimized, and ROI increases.
Here’s the clincher: the agility of value-based talent management hinges on an agile approach to development. That is, only in organizations where development is a continuous process can talent be leveraged to meet the dynamic needs of the enterprise. Agile talent management requires real-time line of sight into talent strengths and opportunities, and the infrastructure (e.g., coaching culture) to respond.
Full circle.
So, is talent ROI possible without formal assessment? Absolutely. But the problem does not live in the assessments (alone); it’s in our seasonal approach to performance and talent management.
Adopting a continuous approach to development, investing in a robust coaching culture, and viewing talent through the lens of value-generation will offer far more (measurable) performance insight than annual appraisals. Remarkably, these shifts also enhance value offered by formal assessments. After all, we need to see the whole picture to solve the right problem.