Eliminating Performance Ratings: Learn How Medtronic Did It

October 7, 2013 - 5 minute read - Posted by

Two years ago, Medtronic Inc, a Minneapolis-based developer and manufacturer of medical device technology and therapies, scrapped its performance management system. It eliminated the traditional rating-based performance management system. No more assigning a number between one and five to each employee. No more filling out stacks of paper work at the end of the year. Medtronic moved away from competitive assessment toward providing real-time performance feedback, coaching and development sessions for employees. Despite the initial concerns of eliminating the rating-based system, employee engagement surveys and focus groups have shown that the whole organization is more satisfied with the new process. Medtronic decided on the change due to the following concerns that many companies today are also facing:

  • Employees spent a lot of time to make their self-appraisals stand out. When employees have only one opportunity to shine and demonstrate how you contributed to the company during the year, they will want to stand out. Maybe even exaggerate if your compensation system is linked to the outcome of the performance appraisals. As a manager, how do  you ensure that your 20+ employees are fairly representing themselves? Should it be their responsibility to provide details of every achievement they have done?
  • All teams are not created equal. By applying the same scale to rate employees across the organization is somewhat flawed and unequal. A high performer in a low-performing team may earn a “5” based on individual performance relative to their peers, while a worker in a higher performing team who has a more critical position and is making more impact is only earning a “3”. How do you fairly rate each employee’s performance and contribution?

There is a tendency in HR to over-engineer processes such as performance management. Many experts would agree that the traditional annual performance appraisals are broken. Employees loathe them and managers are forgetting the real purpose behind performance reviews. Medtronic wanted to go back to basics – providing employees with feedback on their performance and supporting them in achieving their goals. Now, they turn their performance reviews into a conversation where both employees and managers discuss future goals.

Medtronic tried using the “start, stop and continue” model to guide their coaching sessions. The model encourages employees and managers to talk about what the employees should start doing, what they should stop, and what they should continue. After getting feedback from its team, Medtronic found that the model did not allow the conversations to be geared towards results. Therefore, they changed the discussions to focus on individual strengths and areas for development. Managers become coaches who support employees to achieve their objectives and to pursue their individual career development. Performance coaching sessions are no longer about managers giving a rating on past behaviours; they are about improving on future ones.

Medtronic calls its new process “Performance Acceleration” focused on discussing an individual’s performance against specific business objectives. The process allows for quarterly feedback and goal setting between managers and employees. Employees are encouraged and coached on creating objectives that are aligned with critical business activities. Medtronic also adds a recognition program called “eMpower” to drive 3 key elements of employee engagement: fostering participation, recognizing performance, and maximizing employee potential.

More companies are moving away from the annual performance appraisals. Managers are recognizing the effectiveness of regular coaching sessions and real-time feedback. Employees are constantly looking for ways to challenge and improve themselves. One important lesson I value from Medtronic is that the company listened to its employees and found a great way to accommodate to both the business’s and employees’ needs. Although the initial concerns stemmed from the business side, Medtronic took into consideration employees’ feedback to develop its “Performance Acceleration” program. I encourage all of you to send out an employee engagement survey to gauge the satisfaction level when it comes to your performance management system. 

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