Is the Employer-Employee Relationship Changing?

Is the Employer-Employee Relationship Changing?

Peter Cappelli suspects that it is. At HRE, the Wharton professor interprets the recent wave of organizations radically overhauling or even abolishing their performance review processes as a sign of a more fundamental transformation in the nature of this relationship:

By the 1990s, … [t]he growing interest in maximizing shareholder value and the increasing presence of financial thinking in the operation of big companies fueled the idea that employment is really an economic relationship: If you don’t give employees a financial incentive to work hard, they won’t do it. In that context, merit pay became the linchpin of the relationship with employees, and the purpose of performance appraisals was to determine merit pay. The goal was to measure past performance, document that measure and then hand out rewards based on it. …

Dropping performance appraisals — as so many leading companies seem to be doing now — cuts right at the heart of the idea that employment is an economic relationship and the notion that supervision is really just an accounting function: Total up the points and pass out the money. It’s taking us back to an earlier idea that employees actually need to be managed and that the supervisor should be helping them improve their performance and develop their skills. Merit pay still has its place, but that role is simply to encourage the main goal of improving job performance and skills.

Cappelli’s idea that the ongoing trend is not about performance appraisals per se, but rather the broader change in thinking that it represents, is an interesting way to look at the issue. To a certain extent, however, our research disagrees with the notion that “employees actually need to be managed and that the supervisor should be helping them improve their performance and develop their skills.” This describes a heavily top-down way of managing employees.

Instead, we would argue that professional relationships are indeed changing, but rather than reverting to a bygone era of performance management, the emerging management style is more collaborative, with performance and development becoming the shared responsibility of manager and employee. This change is also reflected in recent changes to performance management that focus on more frequent, informal, two-way conversations.