How to Make Ratingless Performance Management Systems Work

Listen to the war stories. Talk to managers to find out why they think poor performers persist in the organization and to uncover any myths that can be corrected about dealing with poor performers.

Create a strong culture of feedback. "It's an uncomfortable conversation, but it's one that needs to be had," Plunkett said. Instead of waiting to address poor performance at a formal review, consider approaching it through more informal, less threatening ways. Encourage employees to talk to each other and recognize co-workers for good performance as well, as this helps lower defensive barriers.

Be specific. "Get concrete around a specific task or deliverable" to have an objective that can be measured, said Shonna Waters, Ph.D., SHRM's vice president of research.

If the manager notices the employee is not meeting that objective, use informal methods to point that out. If the poor performance persists, proceed to the next step in the process, such as written documentation.

Make feedback fun. "Create something fun for [employees] to participate in," Plunkett suggested. That might be earning badges for completing microlearning activities or using leader boards to encourage peer-to-peer competition. Co-workers who hold each other accountable for their work performance can promote a high-performing culture. 

Evaluate. Use structured interviews and internal reference checks to keep underperforming employees from job-hopping around the organization. Change up types of recognition. Using a performance rating as the determining factor for promotions, raises and bonuses confuses the decision process for managers, Waters said, and they become frustrated that they are not promoting the right people.

Instead, "use different criteria for different decisions … and make decisions around those [employee] outcomes, " she advised. Additionally, strategize with your organization's leaders to determine the purpose of the bonus system, how big the bonus budget should be and how far down into the organization bonuses will be awarded.