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Engage Employees Part 4: Is PMS Rating a Tool to Engage and Retain People?
Jan 09, 2016
Engage Employees Part 4: Is PMS Rating a Tool to Engage and Retain People?
In one of the earlier posts “Is Socialism at Work Killing business?”, I saw several comments why this was good in theory and how in practice when there was a war for talent it was almost impossible to differentiate. This reminded me of several situations when my clients wanted to be liberal with ratings in order to engage employees and retain them.
Let us examine some facts and situations:
1. Positive Impact of PMS Rating on Engagement
In several client organizations we had observed that performance ratings had a positive (or negative) impact for 6 to 8 weeks only. After this period people were back to the same level of engagement (or disengagement) as that before the ratings. The attrition was postponed by a few months or at best by a year. If the latter happened, HR achieved its goals of lowering attrition and so did the line mangers. But were these people productive? No, they were not productive. From a shareholders perspective and from a customer perspective they did not deliver as well as they ought to have delivered.
2. PMS Rating and Attrition
In another analysis we found that the attrition had no correlation with the undeserved high ratings. If people were disengaged and had a better opportunity with another organization, they would leave even if they were given a rating higher than that they deserved. However, if they were mediocre and could not find a job they would continue with the business. If they were people managers, they epitomized felicitation of non-performance leading to disengagement and mediocrity in the team.
3. PMS Rating, Performance and Attrition – A Case Study
In one of the consulting firms, PMS rating was rampantly used as a lever to engage employees and retain them. This led to a culture of work avoidance leading to an inefficient, non-responsive and loss making firm, despite having the best of the talent in the industry. There was no incentive to perform. In fact they reached a situation where team members, who were fresh from institutes and those with up to 5 years of experience, worked the hardest. Most of the Project Managers, Directors and even Partners were busy managing their managers rather than managing their performance or adding value to their clients or to their teams.   There was a profound belief amongst people that they needed to work hard for the first 3-5 years till they were promoted to Project Manager level. They felt after becoming a Project Manager life was “cool” and there was no need to work.
Any business in any industry and in almost any country had to work really hard to make losses in 2005-07 period.  This firm made it happen despite the best talent they employed and a great brand name they had. This is the far reaching consequence of using performance rating as a tool to solve the problems in the short term.
Did they manage to engage and retain employees with all the frivolous ratings that they came handed out? I understand that their engagement scores were in bottom quartile and their attrition was the highest in the industry.
With reducing lives of leaders and HR professionals in any organization, the focus on solving the problems in the short term is significantly high. Taking tough calls, even if we lose some good talent, becomes difficult if the long term orientation is missing. We can’t blame our fellow leaders in the industry and our HR fraternity as short term-ism is a global phenomenon. But the benefit of an undeserved performance rating is just too short to merit a consideration even in this world of short term-ism.
Now, if pay (Post: Pay More and Disengage Employees), promotion (Post: Promote and Part), and performance ratings do not lead to engagement, what engages employees? 
Let us discuss "what engages employees?" next week.

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