Performance Ratings, pt 1: A New Paradigm Under Way?

If there is one trend really exploding in the HR/Management space right now, it is the wave of companies getting rid of their annual performance reviews – i.e., the process where all employees’ performance is rated once a year on a standardized scale, according to standardized criteria, usually by their immediate supervisor. When software giant Adobe declared that they had thrown out their entire annual performance review in 2013, they seemed to open Pandora’s box: Since then, companies like Gap, Accenture, Deloitte, and even the rating pioneer GE have followed. HR representatives, managers, and employees have all testified to their satisfaction with finally being rid of the unpopular, time-consuming performance ratings. The issue is now sparking heated debates at both scientific conferences and industry meetings.

In one way, you could say that the change was long overdue. It is well known that performance ratings in general, and the annual performance review in particular, are highly unpopular among practitioners. 95 percent of American managers think performance ratings are too time-consuming and do not contribute enough value to the organization (CEB Corporate Leadership Council, 2002; 2012). A Deloitte study from 2014 showed that only eight percent of companies agree that their performance management process contributes substantially to their success. This is quite remarkable for a process that the average manager of a large American company spends 210 hours a year working on (Corporate Leadership Council, 2012). In addition, many of the practitioners I meet are emphasizing that traditional performance ratings no longer meet the demands of modern work life. It is a far too rigid process for today’s fast-paced, flexible, and fluid world of work.

To add to this, psychological research has long pointed to a number of problems with performance ratings. For one, there is very little research showing any consistent increases in motivation or work effort following performance ratings (e.g. Aguinis, Joo & Gottfredson, 2011; DeNisi & Smith, 2014). Numerous studies have also shown that the accuracy of the ratings is generally far from good (Levy & Williams, 2004; Murphy & Cleveland, 1995). Furthermore, anyone with rudimentary knowledge of behavioral psychology knows that feedback given once a year has a scant chance of directing or changing employees’ everyday actions.

So, to sum up: We have here a practice that is disliked by most if not all important stakeholders, that is afflicted by various problems in both accuracy and value creation, and that is a bad match with today’s work life. Shouldn’t it be a no-brainer to throw it out, then? Well, I think it is safe to say that the traditional performance management practice, with its annual review and complex rating forms, is a legacy of the industrial era and was bound to be revised sooner or later. However, the story does not end with getting rid of ratings. The real interesting question to ask is: Where do we go from here?  Just because the annual performance review gets the boot, it does not mean that performance management as a whole has become any less important. Rather the opposite, actually. Now we need to ask ourselves: What deeper challenges is our discontent with ratings a symptom of? Well, for one, we are back to the classical issue of how to fairly judge other people’s performance. We are also back to the ever-present issue of managers’  unwillingness to bring up performance problems. These issues will not resolve themselves just because we drop the annual performance review – but it could be a start. So now that things are really moving in the performance management space, it seems like a good time to revisit some of the broader and more fundamental issues that a modern, well-designed performance management system must be able to handle. We will spend the three following posts digging into just those issues.

 

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The Millennials, pt 4: What to do about them?

Today, we reach the end of the series about the Millennials – that big generation born in the 1980s and 1990s that employers, media, and consultants all vehemently wish to understand. In three consecutive blog posts, I have tried to scrutinize widely held beliefs about this generation from a scientific point of view. We have looked at the big problems attached to studying generations in research, and we have reviewed a number of commonly held assumptions about Millennials’ work values and work attitudes. So after this intense deep-dive in research – what are the implications? How can managers, HR departments, and employees for that matter, make use of a more nuanced research-based view on the Millennials? In no way claiming to have some definite answer, I have tried to distill some food for thought from the literature and my own experience as a researcher.

• It’s evolution rather than revolution. A lot of actors have a lot to gain from depicting the Millennials as a tidal wave now splashing into the workplace, since the implication of that would be that companies need to get ready for them now (read: spend a lot of money on books and consultants in order to please this new species). But what research shows is that most of the characteristics displayed by Millennials only represent the latest step in long-standing societal trends – such as increasing individualization, decreasing acceptance for authority and hierarchy, and an increased mingling of the work and leisure domains. Thus, in most respects you don’t have to apprehend a radical shift from one day to another – rather, make sure your organization is engaging in a long-term job to adapt to the mega-trends in working life. They will likely continue well beyond the Millennial generation.

• Distinguish between attraction and retention. Research seems to indicate that what draws Millennials to a certain organization is not necessarily the same as what keeps them there. Some of the notorious buzzwords surrounding this generation – such as social awareness, making a difference, and value congruence – seem to be more important when it comes to attracting them in the first place. In order to make them stay, however, there is little sign of Millennials being any less interested in pay, recognition, and benefits than any prior generation. Strengthening intrinsic motivation is clearly very important for long-term motivation and happiness – but that has little to do with generations; it is more of a universal value. Stated differently: Social responsibility and good values are probably growing in importance to get you a foot in the door with the Millennials, but once you have managed to hire them you will likely have to rely on the old classic – a nice mixture of extrinsic and intrinsic inducements.

• Happy now, not later. One of the broad trends that seems to emerge from research findings is that Millennials are living more in the present than previous generations. They value their leisure interests, they want work to be fun, and they want to have good working conditions in the here and now. And although evidence is still inconclusive, it does seem like this generation is also more prepared to jump ships if not happy in the workplace. Hence: Don’t expect them to do years of struggle in order to perhaps get some attractive position later on. Don’t expect them to want to ”pay their dues” at your company. At least not if you are not very clear with why they should do it, and what type of coaching and support they can expect during that time. Also, this means that direct supervisors can no longer wait to act on employees’ discontent. If someone is unhappy with work, you will have to act as fast as possible to show you are addressing the issue.

• Set a routine for managing expectations. There seems to be at least some support for the notion that Millennials enter the workplace with higher expectations, that they are more confident about their own value, and – as mentioned above – that they are less prepared to wait for gratification. To some extent this is a good thing, since it forces employers to step up their game. However, reality does not allow for all these high expectations to be realized. Managers and HR need to have an agenda for how to manage junior employees’ expectations from day one. In my experience, one of the most effective ways to do this is to work with gap analysis: Set goals together with the employee for what skills and competencies he or she needs to develop in order to take on the next challenge, and continuously assess how far along the person has come in acquiring those skills. This way, you can help the employee form a realistic view of career development and opportunities, while also getting a routine for discussing his or her development at work.

To conclude, it is clear that the Millennial generation does bring some changes to the workplace – and most of them are for the better. This generation seems to be better than previous ones at demanding management practices that are already known to be effective, such as frequent feedback, swift interventions to remedy work environment problems, and a focus on providing engaging tasks. At the same time, we have learnt that reality is a lot more nuanced than the image often painted in the media: These people still place a lot of value on pay and benefits, they are no more intrinsically driven than previous generations and we are not sure that they are less interested in job security than their predecessors. And also remember: The Millennials are still young. As they increasingly enter their childrearing and family years, some work values – albeit not all – are likely to evolve too.

 

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The Millennials, pt 3: Do They Have an Attitude or What?

Welcome back for our third plunge into the topic of Millennials, the generation born in the 1980s and 1990s that management consultants and business book authors cannot not seem to get enough of. In this series, I have already pointed out the problems with studying generations and scrutinized some common statements about this group’s work-related values. Today, we are moving on to work attitudes: Ways of functioning when in the actual workplace. Just like last time, I have listed some often-heard statements about this generation and then looked to research to see how well they hold up. I also use some findings from my own research.

”Millennials are more entitled and demanding than previous generations.” There is some support for this almost classical rant. The Millennials rate their self-confidence and general self-esteem as higher than previous generations (Lyons & Kuron, 2014). They also to a higher extent expect to hold a high-status job in the future, and rate their skill level as higher than previous generations (Twenge & Campbell, 2012). According to some sources, there has also been an increase in narcissism scores for successive generations, the Millennials scoring the highest so far (Stewart & Bernhardt, 2010; Twenge & Campbell, 2008) – at least among Americans. In other words, there might be some truth to the claim that Millennials are more confident and demanding in the workplace. However, it is important to note that no studies seem to have looked at actual behavior at work; they are all based on self-report measures. In other words, we do not know exactly how these self-perceptions translate into action.

”Millennials are less committed and loyal to the organization”. Researchers disagree on whether there are reliable differences in commitment, i.e., the felt bond to one’s employer, between Millennials and previous generations. A number of studies have shown declining commitment over generations (e.g. Brunetto, Farr-Wharton, & Shacklock, 2012; Lub et al., 2012). However, these studies have all been cross-sectional, i.e., just surveying all age groups at one point in time. Costanza et al. (2012) conducted a meta-analysis of 20 studies, and found that generational belonging had little explanatory power for commitment differences. Instead, they argued that the differences that they saw were due to the age effect: Older and more tenured workers tend to be more committed to their jobs (Mathieu and Zajac, 1990). When it comes to loyalty, the tendency seems to be somewhat clearer: Intention to quit is rising with consecutive generations (Lyons & Kuron, 2014). More research is clearly needed in this area, though, since it is difficult to know if this development is due to an attitude change among Millennials or structural changes in the job market.

”Millennials are individualists and not interested in teamwork”. Even though there is definitely truth to the claim about rising levels of individualism in a broad sense, there is very little evidence supporting the idea that Millennials should be less cooperative than previous cohorts. Researchers do not seem to have found any reliable differences in the importance that different generations place on teamwork (Lyons & Kuron, 2014). Studies have found, however, that disinterest in teamwork is a common stereotype held about Millennials among older generations (Lester et al., 2012).

In sum, we again find that some claims about the Millennials hold up better than others in the face of research. There is some support for the notion that Millennials demand more of their employer, and the readiness to quit one’s job seems to be on the rise. However, we do not know if this really is an effect of changed attitudes among Millennials, or rather an effect of changing job markets and work environments. The fact that there is little clear evidence for changes in organizational commitment may tell us that Millennials are not necessarily less attached to their organizations than previous generations.

So, we have now covered both Millennials’ work values and attitudes in the workplace. After this, I think we can consider ourselves covered on the main strokes of existing research – so in our next and final part of the series I will turn to the neat task of drawing out some practical implications for management and HR from this rather complex picture.

 

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The Millennials, pt 2: Do They Really Want Other Things?

So, we are back to the subject of the Millennials – the now almost mythical generation born in the 1980s and 1990s, who are said to have completely different attitudes and preferences in work life than previous cohorts. Last time, we concluded that researching generations is a really tricky business. Nevertheless, studies are now amassing on how what distinguishes the Millennials. This research, I quickly noted, presents a far more nuanced and complex picture of this generation than that portrayed in the media. In fact, there were so many interesting aspects to this research that I decided to split the review into two blog posts. In today’s chapter, we will start out by looking at work values, i.e., what people see as important in a job and an employer. We will simply go through some commonly held assumptions about the Millennials, to see how they hold up to scientific scrutiny. I also added some reflections based on findings from my own studies of young talents towards the end.

”Millennials value challenge and stimulation above salary and advancement”. This very common claim only receives mixed support in research – it is even partly contradicted. Parry and Urwin (2011) in their review of the literature found that there is quite little solid evidence for generational differences in these values. Some trends can be spotted, however. If we start by looking at the so-called extrinsic values, i.e. salary, rewards, recognition, and advancement, Lyons and Kuron’s (2014) review showed that these values gained in importance up until the mid-90s, and then dropped off. This indicates that the Millennials are somewhat less focused on extrinsic values than was Generation X (born approximately 1961-1980), but still value them more than did the Baby Boomers (born approximately 1945-1960). Hanssen and Leuty (2012), however, found that compensation had gained in importance among Millennials, while advancement was seen as less important. Some studies have also found that salary becomes more important to Millennials as they go from being students to entering the workforce (Kuron et al., 2015). As for the so-called intrinsic values, such as challenge, stimulation, and interesting tasks, they have remained stable over the years (Wray-Lake et al., 2011). There is little evidence to suggest that they would be more important to Millennials than to prior generations.

”Millennials value work-life balance more than previous generations”. Here research is more supportive. In the midst of all the uncertain findings about work values’ evolvement over time, one trend stands out as clear: People value their leisure time more and more, while the centrality of work in our lives decreases. According to Lyons and Kuron (2014), all the large studies available indicate that the Millennials is the generation that values work-life balance the most so far. For instance, they are not prepared to work as long hours as previous generations (e.g. Cogin, 2012). However, the increase in leisure values is a long-term, ongoing trend, not a radical shift arriving with the Millennials.

”Millennials are more concerned with their work being meaningful.” This rather fuzzy statement is often heard in the media. Its accuracy depends, of course, on what you put in the word ”meaningful”. As mentioned above, the evidence does not support the idea that Millennials would be more intrinsically driven than prior generations. However, there are some indications that Millennials are more concerned with work aligning with their personal values (Weeks et al., 2016), although this evidence is not conclusive. If we are talking about meaningfulness as helping others through one’s work, this value has remained stable over the generations (Lyons & Kuron, 2014). In an interesting study, however, Kuron et al. (2015) showed that meaningfulness as in socially responsible organization and a non-hierarchical work environment seemed to be more important in the recruitment phase than during employment. In other words, it might be that ”meaningfulness” has become central to Millennials when choosing an employer, but once they are hired, they are rather driven by other things. Another possible explanation for the meaningfulness hype, according to Schullery (2013), could be that the above-mentioned increase in leisure values spills over to working life: Millennials want work, just like spare time, to be fun. Having to work with less exciting tasks will then seem disengaging and thus meaningless.

To summarize, research only partly supports the claim that Millennials have substantially different work values compared to their older colleagues. For certain, the simple extrinsic-intrinsic scale does not get us far if we want to understand what is happening. Pay, benefits and a comfortable life still matter a lot to the Millennials, and intrinsic drivers are as important as ever. What seems to be the major development, rather, is the increase in leisure values – apparent both in the form of demands for work-life balance and a stronger urge for ”having fun” also at work.

Regarding the concept of meaningfulness, I do believe there is something there, although it has not really been pinned down by research yet. Over the last two years, me and my colleagues have conducted a comprehensive interview study with a large number of young professionals selected as talents in their companies. One thing that comes across as central when we ask them about their work values is to get to work with ”the whole picture”: They are allergic to the idea of being a cog in the weel and want to understand exactly how their work fits into the larger scheme of things. They want to know the purpose of what they are doing (maybe Generation Y as in ”why” is not such a bad term after all!). That purpose does not have to be to save the world – but it has to be clear and make sense. When defined in this way, it is possible that we may talk about meaningfulness as a defining work value of this young generation.

So, that was the somewhat more complex picture of what Millennials seem to want out of work. But what happens once they actually enter into the workplace? That is what we will try to find out in the next blog post, where we take a look at generational differences in attitudes at work.

The Millennials, pt 1: What Is Real About a Generation?

For the last decade or so, the Millennials – or Generation Me, or Generation Y – has been a beloved subject in popular Management and HR press. People born roughly between early 1980s and late 1990s, it has been said, are entering working life with values and attitudes completely different from previous cohorts. They are socially conscious, creative, and they demand a sense of higher purpose as well as frequent feedback and flexibility at work.

No doubt, the Millennials concept has been a big commercial success, since it implies that organizations must invest heavily in adapting to these allegedly creative but high-maintenance youngsters. But the question is: How much of what we hear about the Millennials is actually real, in the sense that it it backed up by research? That is the question I will try to address in a series of four posts (when looking into the issue it quickly became clear that this subject would need its space).

Before we dive into concrete research findings in the next blog post, let us take a step back and look at the generation concept – a highly controversial one in psychology. Actually, this is an incredibly tricky phenomenon to study scientifically. Right away, you run into the so-called age-cohort confound: The difficulty in deciding whether a certain effect is due to a group’s current age, or to their generation membership. To illustrate this, let us say we are interested in people’s willingness to take risks in their career. We distribute a survey on the topic among one group of 25-year-olds (Millennials) and one group of 60-year-olds (Baby Boomers). The results show that the 25-year-olds are more willing to take risks than the 60-year-olds. Does this mean that we have established that the Millennial generation is more prone to risk-taking than Baby Boomers? Not really. The difference might just as well be due to the fact that the Baby Boomers simply are older, and older people tend to be more risk averse in general. How do we know that the Baby Boomers were not just as risk-prone at 25? The point is; if you just survey different age groups at a single point in time, you can never really decide between these two explanations.

Unfortunately, most of the generation research has been carried out just like that (i.e., with cross-sectional design). What you need to do if you really want to say something about generational differences is to follow several age groups in parallel over an extended period of time, preferably many years. Up until recently such studies have been relatively scarce, not least due to cost- and practical issues, but now they are fortunately increasing in number.

The difficulties in studying generations have made some researchers claim that the whole concept is useless as a scientific term. Notably, David P. Costanza and colleagues (e.g. 2012; 2015) at George Washington University has argued that most of the characteristics we attribute to the Millennial generation are really age effects. Put simply: The things people say are typical of the Millennials are just due to the fact that they are still young. Most young people, regardless of generation, value flexibility, challenge, and opportunities to be creative. As we grow older, we tend to shift towards a focus on e.g. stability and security. However, far from everyone agrees with this perspective, and there is a growing research base actually finding differences between generations in the workplace.

In sum, ”generation” and ”Millennials” are clearly controversial topics from a scientific perspective. Even if research is now picking up speed, we need to interpret any evidence about the Millennials with caution. That being said, I will anyhow make an attempt in the next few blog posts to summarize the findings to date – and the conclusions that can be drawn.

 

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