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According to CEB, on average, employee performance drops 10% when ratings are absent from the review process, largely due to the inability of managers to effectively manage talent without ratings.
It noted that while there is often an initial positive reaction after eliminating performance ratings, key performance outcomes like quality of manager feedback and employee engagement ultimately suffer.
Pointing out that this has a greater impact on high-performing employees, CEB noted that in organisations where ratings aren’t there, the number of employees who believe their organisation connects performance to pay decisions dropped 8%.
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Additionally, without a grading system, managers are likely to struggle when when trying to explain to employees how they performed in the past and what steps to take to improve future performance.
In fact, employees working at organisations with no ratings scored their performance conversations with managers 14% lower than at organisations that use ratings.
CEB also found that managers at organisations without ratings also spend fewer hours on informal performance management conversations – 24 hours per direct report per year, versus 36 hours at firms with ratings.
“Without the tangible symbol of a rating, employees don’t understand the processes or the philosophies behind their organisation’s performance management, which causes them to put forth less effort at work and become disengaged,” said Brian Kropp, HR practice leader, CEB.
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