The press coverage of Microsoft’s ‘stack rating’ system has put the whole process of performance management and ratings back in the headlines. I am sure many HR people are rather surprised that a system that was popular in the 80s and 90s is still being used by a ‘modern’ company like Microsoft, especially one that needs highly creative people who bring discretionary effort to work. I am sure it is no coincidence that their rather poor showing on a number of product launches and the stack rating system are linked.

As many of the press articles have pointed out it drove a culture of politicking and figure pointing. When you look through a neuroscience lens it is almost the perfect storm for closing down productivity, creativity and reward in the brain. And this is true of many performance management processes; the way most processes are executed creates a brain-fried rather than a brain-savvy experience for employees.

Most performance management processes have the intention of:

• Achieving improved performance,
• Fair promotion and pay practices,
• Reliable legal documentation,
• Documenting performance against goals, usually for reward purposes and,
• Helping employees with career and skills development.

In some cases they also aim to help the most able employees get even better.

In my view there is nothing inherently wrong with the intent behind performance management, it is the execution that makes the difference. Now neuroscience is beginning to point out some challenges to the execution of performance management processes that mean organisations may really be creating a no-win situation.

Here are some of the findings and ideas about how you could make your performance management process more brain-savvy and hence get better results.

Brain-fried verses brain-savvy

Threat and reward

The CORE model identifies the common factors that activate both reward and threat responses in social situations. These fall into four elements of human social experience:

• Certainty: the knowledge that we can predict the future
• Options: the extent to which we feel we have choice
• Reputation: our relative importance to others
• Equity: our sense that things are equitable

These four elements activate either the ‘primary reward’ or the ‘primary threat’ circuitry of the brain. For example, a perceived threat to one’s sense of equity activates similar brain networks to a threat to one’s life. A perceived increase to your reputation activates the same reward circuitry as receiving a monetary reward. The reaction happens in a nanosecond and is automatic, driving behaviour before the individual has a chance to rationally consider their response.

For example when thinking about performance management threat may be activated in the following ways:

• A sense of uncertainty about the views of the manager with regard to job performance
• A demand to carry out the role in the way the manager judges is correct reduces rewards for options by reducing choice
• Offering negative feedback impacts the sense of reputation which leads to reduced connection with the group and potentially creates a sense of shame
• The power in the process, including timing and rating is with the line manager; creating a sense of inequity.

Let's look at the elements of a typical performance management process and how the science can inform thinking.

Goals
A surprising number of organisations I speak too still have goals drafted by the manager and if they do not completely draft the goals they determine what they should be and the measures. Goals written for employees will lack buy-in. Research on changing behaviour has shown that people need to have buy-in and a vision of the future to resist impulsive behaviour based on past habit. Scientists in Germany found that vividly imagining the future results activates the hippocampus, part of the brain responsible for imagining the future (and memory) and the anterior cingulated cortex , ACC, involved in reward-based decision-making. This resulted in a greater ability to delay immediate rewards and reduce impulsive choices thus maintaining new behaviour. Achieving goals means creating new ways of working and this will only be achieved if employees can overcome their automatic, habit system through activating their planning and goals-directed prefrontal cortex. Where employees draft their own goals for agreement with their manager things will be better but having immediate reward and reinforcement of new behaviour is essential for shifting from old habits run by the basal ganglia to create new habits which must be done by planning, priming and reinforcing using the prefrontal cortex.  

Feedback
Maybe one of the most brain-fried elements of performance management is the whole notion that feedback will improve performance. As far back as 1994 psychological research found that 38% of feedback made performance worse. How it ever became so pivotal in management practice is beyond me! I never met anyone who thought it did any good for them. It only ever helped the feedback giver, usually through the sense of off-loading something that irritated them. Neuroscience is adding to these concerns by pointing out that feedback creates threat in all of the CORE social domains. In addition people create a mental model to cope with the volume of information coming in through their senses. These mental models also occur in work. They create shortcuts to how to do the job. People are highly unlikely to have similar mental models. Therefore feedback rarely fits with the mental model held by the employee. Shifting mental models is hard to do, and very unlikely when there is little or no reward for the brain.

Personal change
The neuro-scientific understanding of goals and feedback raises questions about how people can best be helped to change. Science is showing we don’t always approach work goals rationally. Rather we think about our future self like we think about another person. How well we know our self will determine how we achieve goals and how much we listen to feedback, even positive feedback. People need to have a clear mental picture of their future self and be self-aware enough to know the degree of change that is possible. You can see a short animated video explaining this here.

Rating scales
Rating scales create in-groups and out-groups across the business. Whilst this may not be all bad it can heighten tensions and reduce collaboration.

Reward
The assumption in performance management is that people will perform better if they are rewarded with more money. Research by Dan Ariely suggests performance actually decreases with higher levels of bonus reward. Money is both motivator and stressor. If rewards are very high the stress reduces the performance. You can see him talking about his research here

What is often ignored is that social-based rewards such as praise and positive feedback create a pleasure response and a trigger in the brain of reward and wellbeing. Traditional performance management systems are missing out on the power of social reward and positive feedback. You can see a short video on the neuroscience of reward here

Why performance management persists

Whatever the challenges the current approach is familiar. The brain likes to be able to predict what is going to happen. Maybe more importantly it is brain-savvy for managers. Where performance management mainly creates a threat response in the CORE elements for employees they are mainly rewarding for managers, at least when they are applying the process to employees. They may feel differently when the process is applied to them! Managers have certainty about the timing, rating and messages; they have options about when and how the review takes place; they have power and their reputation is enhanced in the process. They probably feel it is fair.

What to do? The Brain-Savvy solution

The brain-fried elements of performance management can be overcome by shifting the process in the direction of more CORE rewards rather than threat:

• Give employees control over process, timing and data, especially who they ask for feedback and the goals they create
• Managers and peers focus only on positive feedback
• Teach employees to self-assess against well-defined standards. The manager’s role becomes that of a performance coach

Giving employees’ options and control, coaching rather than judging and focusing on what is going right rather than what is going wrong is brain-savvy.