The idea of merit rating or ranking is alluring. The sound of the words captivates the imagination: pay for what you get; get what you pay for; motivate people to do their best, for their own good.
The effect is exactly the opposite of what the words promise. Everyone propels himself forward, or tries to, for his own good, on his own life preserver. The organization is the loser. Merit rating rewards people who do well within the system. It does not reward attempts to improve the system.
We have abolished our annual traditional performance review system in favor of ongoing "check-ins." Every quarter, (4 times per year) all team members are participating in the "check-in day" and they discuss on the following four questions:
- How have I contributed to the success of the firm? (How have I created value for the firm?)
- How have I contributed to the success of others?
- How have I leveraged the ideas of others?
- What have I learned?