Does your company do periodic performance evaluations?

 Do we completely abandon performance evaluations?

I think they're just formal documentation of what should be happening every day.  I think you could.  However, coaching and feedback become even more important.  If you have managers who do not provide coaching and feedback, abadoning performance evaluations will make that worse and probably increase turnover.  Corporate Executive Board did some interesting research on millenials recently that talk about how important it is to have regular career planning conversations and "reality checks", along with feedback.

- If so, how do we fairly and effectively manage employee performance?

We still pay on performance.  While there is not a rating, we have clear job knowledge expectations and how work is done.  Managers convene and discuss performance and we then use a scale to allocate raises and bonuses - so to some extent, performance is still tiered.  This process happens across mutliple levels and differently on different teams, but in our team of 60, the management team discusses and tiers the team members and allocates pay that way.  This is also communicated to employees, that we still evaluate top performers, performers, and low performers and that top performers will receive higher bonuses and raises.  We are allocated bonuses and raises based on a variety of factors, only part of which the employees performance controls (overall Group performance).  In Marketing, they give a budget to each manager and they decide compensation based on top performer, performer, and low performer and use the HR guidelines, which are very wide.

- Have you abandoned performance evaluations?

Not completely.  We have abadoned ratings on performance reviews.  I work for a global Fortune 100 company.  My subsidiary company (which is about 7-10% of the Group) does performance reviews without ratings (i.e., there is no grade or score or scale for ratings).  We did a two year pilot in HR, marketing and Accounting (where I am).  

- If so, how do you fairly and effectively manage employee performance?

The same way, without the formal documentation.  A performance review should never deliver a surprise, ever.

- Have you read the popular press' acocunts of the need to do away with performance evaluations and, in response, have you switched to the Manager Tools process?

We always did 1:1s and manager training always emphasized what they called coaching and manager tools typically calls feedback.  They increased skills though by having targetted training and adding practice about dealing with various circumstances and getting advice from other managers.

- If so, what have been your results?

We did a pilot over about 150 people in conjunction with a bunch of training about coaching and feedback for managers.  Thus, managers were given more tools that are consistent with the Manager Tools concepts about feedback and about how to have coaching conversations and what a coaching conversation is.  Removing ratings resulted in substantial improvements in employee engagement across 6 questions (measurement is a sum of the % for the highest two scores):

1) I understand how I progressed towards my goals from 75% to 91%

2) I have a clear understanding of year-end performance 80% to 90%

3) The performance review process accurately measured my performance 66% to 91%

4) I understand how my performanace impacts my compensation from 81% to 89%

5) I am appropriately compensated based on my performance from 66% to 89%

6) The review process is fair from 69% to 91%

However, also note that people who were not involved in the no ratings pilot also received the coaching training that the managers in the pilot did, which resulted in similar improvements in employee engagement (not quite as strong across most of the questions, but almost) in the "ratings" group (examples, #1 75-86, #6 69-85).  So honestly, the thing that will most affect your employee engagement is having all managers providing feedback and coaching.  With or without a performance review or a rating, coaching will have the biggest impact.  The rating versus no rating was maybe a 5% change, the coaching training was as much as 10-20% on some questions.