It's not OK to 'rate' employees

Seems like with every passing week, we hear about yet another company deciding to do away with the traditional practice of employee performance reviews.

In early February, IBM announced that it would be shifting away from its annual and midyear appraisal process to a more frequent model of feedback. This followed similar moves by companies like General Electric, Netflix, Adobe, and Gap, all of which recognized the need for change based upon the fact that just about everyone from the bottom to the top dreaded the process.


Microsoft, also made headlines a few years back with its pivot away from what's known in the industry as a "rank and yank" review system, in which employees were ordered by performance and then the lowest let go. As a former Microsoft employee — I worked there for eight years in a senior HR role — I knew that system all too well. I was one of its detractors. So when I got to Monster in 2010 and saw that it too was using a forced ranking system, I knew almost right away that I wanted to blow this thing up.

But let me be clear: I'm not just opposed to a ranking that forces employees out the door; I'm opposed to all performance ratings full stop. While these appraisals are rooted in good intentions, the process is typically too complicated, too restrictive and too late. And there are better methods to encourage performance.

So let me tell you why Monster is proudly adding its name to the growing list of companies evolving toward a new HR future — and what we're going to be doing instead to encourage results.

"Someone once said that if performance reviews were a drug, the FDA would never approve them because they’re ineffective and have too many side effects."

The performance management process was originally designed to help companies collect data about employees' performance, to communicate feedback that will encourage better results, to provide assessments of career development needs, and to help identify the best people who would then be awarded raises and promotions. But through my years of experiences in human resources, I could see that annual review processes weren't improving performance, improving retention, and the development of people — it was simply an administrative headache everyone dreaded.

At Monster, for example, starting in January, employees conducted self-assessment surveys about their work the previous year. In these assessments, they had the option to choose from seven categories of performance: too new to rate, developing, unsatisfactory, needs improvement, performance met, high performance, and exceptional.

In February, managers were to review the self-assessments and start their own reports on the employees, using those same categories. Now managers couldn't just choose a category at will, however. The distribution had to follow a Bell curve, which you may have last heard about in your high school statistics class. So only 10 percent of your employees could be high performers and 10 percent had to be unsatisfactory.

So if we were lucky enough to collect executive input, by March, in-person meetings between manager and employee could finally be scheduled. You can guess how often that happened on time. Meaning: You the employee are at least a quarter of the way into the new year— sometimes more — before you find out how you did last year.

This process — typical of large companies — was rife with flaws.

Among the most important: It fails to capture a genuine, accurate and complete picture of an employee. The annual review focuses too much on the past, for example, and is biased by our imperfect memories. I can barely remember what I was working on last week — or what I had for lunch yesterday — let alone what I was working on last year and I'm guessing most people feel the same way. So if an employee receives feedback regarding work from the prior year, can it really be a true learning opportunity?

Meanwhile, as leaders are sucked into the paperwork and processes required to support the review systems, they are likely missing the opportunity to provide better value to an employee through a teachable moment in the present.

Additionally, relying on a subjective, forced determination of "overperformers" or "underperformers" can corrupt entire teams by encouraging personnel to report back on problems over the course of an entire year. The exceptionals among the staff don't perform any differently after the reviews. And at both Microsoft and at Monster, I saw that labeling people as underperformers netted disgruntled employees and a cultural focus on past failures, instead of future growth. Getting put in the category of "underperforming" demoralized rather than motivated those workers and often caused them to continue the downward spiral.

The curve ruins careers. I've seen it happen.

Someone once said that if performance reviews were a drug, the FDA would never approve them because they're ineffective and have too many side effects.

Few employees would disagree; I've heard complaints for years from execs down to the lowest ranks. So why do reviews still exist? Because most companies are afraid of the alternative—the brave new world of non-ranked performance appraisal.

Daring as it may sound, if major companies like Microsoft, Netflix, GE and Monster are making the change to eliminate reviews, you can do it too — though you may have to enlighten your executives around the merits of abandoning ship first. Lucky for me, I work with a great group of leaders here at Monster who jumped at the chance to improve our process. My colleagues saw the value of creating a system that is less about the grades and more about the development of colleagues.

What we agreed upon: Instead of focusing on labels or ranks, we're asking managers to conduct quarterly "check-ins" with employees, to allow feedback that is timelier and more effective.

There are three pillars of this program: goal setting, feedback and employee development. Employees will fill out a short template to bring to these conversations, including one to three professional goals for the quarter, expectations for results in that time and plans to achieve them.

We're hanging our hats upon the idea that by communicating professional aspirations with their superiors, staffers will be more engaged. Knowing that you're in direct control of your goals is extremely empowering — as is knowing that your boss is a stakeholder in the plan.

We are empowering managers at Monster to own this whole process of timely check-ins with limited guidance from us in HR. We don't want to police the situation; we want to inspire trust within all of our staff.

Our hope is that having these conversations more frequently will set the stage for ongoing feedback — that a boss will catch people doing something right and compliment them on the spot, or catch something that could be improved on and then teach the employee how to do so right at that moment.

In a world where we expect everything else to happen in real time, shouldn't the same be true of reviews?

Commentary by Kim Mullaney, executive vice president and chief human resources officer at Monster.

For more insight from CNBC contributors, follow @CNBCopinion on Twitter.