As a manager, how best to communicate the internals of the annual review process to the team?

Question

I'm a new manager of about 6 months to a small software engineering team and we, like most companies, have recently started our annual review process. I've been in the field long enough to know that this is mostly a Dog And Pony Show but, be that as it may, it still needs to be done.

As part of the process each team member is given a rating of 1-3, 1 being under performing, 2 being successful, and 3 being exceptional, with most people falling on a 2. A couple of my team members in particular have been killing it, and I tell them as much in our 1-on-1's. So for their reviews I gave a 3. My manager was in agreement.

A couple weeks pass and my fellow managers and I go to a meeting with corporate HR. In this meeting we're told that it is expected 15% of employee reviews will end up as 3's and our department has around 30% so we need to "calibrate" that to 15%, and change any wording in the free-form part of the review "as appropriate". This means I need to pick one of my two over-performers and give them a 2. Frankly I feel a little disgusted but I don't know if this is common or not.

I've been on the other side of the table where I was told I was doing exceptional and going above and beyond only to land a review that was right in the middle at the end of the year. In my early days I got huffy and fought it, to no avail. As I got older I learned it was BS and looked only at the compensation change.

I'm expecting a similar response from my team members. Eg. "How could I get a 2 if you've been telling me I'm doing exceptional?"

So my question is: How do I effectively communicate this rating to my team member while remaining professional? I could come right out and say "the company made me give you a 2" but I don't feel that's a good idea. In the past I would be told something along the lines "Oh, 2 is actually really good! 2 is right where you want to be!" But that never worked on me and I don't expect it to work on any of my teammates. I asked my manager for advice and he said basically the same thing; tell them that 2 is actually really good. He's been here a while and seems resigned to HR's decision. In fairness, in not really a big deal in the grand scheme of things but, probably because I'm new to this, it doesn't sit well with me. I brought my concerns to HR and got back a boilerplate response of "we need to calibrate to 15%" with no recommendation on how to handle the communication. I escalated within the HR chain of command but have not heard anything back.

Notes:

• Both team members in question are getting a promotion which comes with a compensation and title change. So that's good. This will have the largest impact on their compensation.
• The change from a 3 to a 2 will impact how much of a merit increase I can give, though I haven't been able find out exactly by how much.

Answer 1

I've seen this happen before. I had an old employer with a 1-5 rating system. When I was a manager we were told not to have too many rated 4 or above as this would "mess up the numbers".

It is discouraging that this type of thought continues. Management is thinking that this will incentivize those in the middle to "work harder". What really happens is those who exceed their goals for the year but are rated "average" will take their talents someplace else that does reward hard work and dedication.

I don't know if I'd ask this way but my feeling would be "if only 15% can be exceptional than should we hire more like the 85%? who are not exceptional?"

Answer 2

Frankly I feel a little disgusted but I don't know if this is common or not.

Sadly, it's very common. If it makes you feel any better, your disgust is shared by most middle managers I know (including me).

How do I effectively communicate this rating to my team member while remaining professional?

I asked my manager for advice and he said basically the same thing; tell them that 2 is actually really good.

Particularly with something as important as the annual review process, I believe in being as open and transparent as possible with your team.

Talk to your manager about that first. Unless prohibited, have a meeting with your team to explain how the process actually works. Remember, you didn't invent these rules, so you don't have to justify them. You are just conveying the information about the rules that constrain you in the annual review process.

And since you were basically told what to say by your manager, make sure you include the point that "[your manager says] 2 is actually really good".

You don't have to like the process, but you owe it to your team to be honest. In most cases, they won't like it either, but they will appreciate your honesty.

I brought my concerns to HR and got back a boilerplate response of "we need to calibrate to 15%" with no recommendation on how to handle the communication. I escalated within the HR chain of command but have not heard anything back.

Sadly, many companies have budgeting/annual review processes that end up this way. You could end up with a team full of exceptional performers, some of whom will end up with mediocre raises, and made-up reviews to justify the numbers.

I've tried to argue the point all the way up the management chain and all the way up the HR chain, to no avail. It sounds like you've given it your best attempt to.

Now, it falls on you to do the best you can with what you have been given. There's not much else to be done here. Anything different would have to originate from the top.

Hopefully next year's annual reviews will go more smoothly now that the "15% of employee reviews will end up as 3's" rule has been made known to all managers. You'll be able to calibrate to HR's expectations up front.

Answer 3

Try to solve this in three ways:

Patch: You need to communicate back to the team about company rule of 15% and at the same time take Team's suggestion on your problem. Like "As per my review I considered 30% of people to be of 3 however due to company rule now I have to make that 15% in the system (Not in my mind), Please help in defining criteria on which I sort the 30% list to get top 15%." This will help in two ways team won't blame you for misfortune and at the same time they will be happy about they know how 15% is getting created.

Medium Term: use the criteria created in Patch as rule for your team for evaluation and at the same time improve on-boarding of Managers in your company about the policies. Discuss with HR team for communicating any change in rules to all managers before the start of next review cycle.

Long term: When you go for hiring you don't hire talent to fit the review cycle rules. use this to convince your Manager and HR to create exception list to 15% rule in certain cases.