“Summertime and the living is easy.” A nice sentiment for Ella Fitzgerald, but for most of us that probably hasn’t been true since grade school. Expectations for productivity are as high as any other time of year, and for some organizations the mid-year performance review is just around the corner.
Maybe right now you’re doing performance reviews only once a year. You aren’t alone. Less than half of organizations hold formal reviews more frequently. But in today’s dynamic business environment—the same environment where summertime ain’t so easy—companies are finding that annual reviews are not enough.
The speed of business has accelerated tremendously. With that, goals change. When you and your employee look back on priorities set twelve months ago, those goals may have little resemblance to the current work at hand. How do you evaluate performance on outdated objectives? What’s more, can that outdated evaluation even help the employee prepare for the next phase of a project, or their career?
Think of an annual review as a shiny new car, just being driven off the dealer’s lot. As soon as the car hits the street, it begins to depreciate. With annual performance reviews, from the moment the goals are being drafted, they are subject to change and obsolescence.
The problem with annual performance reviews isn’t just that the goals are static in a dynamic environment. It’s that the reviews aren’t effective. Once a year conversations don’t address problems in a timely manner. They don’t give the employee an opportunity to course-correct a problem until perhaps months later. They don’t provide the positive employee feedback on a job well done that may spur the additional effort and motivation that can be beneficial throughout each review cycle.
If you watched the NBA finals, you saw a perfect example of a dynamic environment that required constant agility, both physical and strategic. Can you imagine if one of the coaches said—you know, I’ll just wait until after the game is over to give the team feedback on their performance?
An annual performance review is like that—information that is given too late to matter. And that’s something no one appreciates. According to the Society for Human Resource Management (SHRM), 66% of employees feel the traditional review interferes with their productivity, with 65% saying the review isn’t relevant to their jobs. Managers don’t like annual reviews either, with 95% saying they are dissatisfied with their current system.
It’s not that employees don’t want feedback. In fact 65% of employees want more feedback—and it doesn’t have to be positive. Eighty-three percent of employees say they appreciate feedback even if it’s negative. Getting employee feedback that’s timely, specific, applicable to their jobs and most of all, more often, vastly improves employee motivation.
The addition of a mid-year performance review gives employees and managers a point to reevaluate goals and performance, while still having time to make changes. But developing a useful mid-year review requires preparation and thought.
Is a mid-year review the same as an annual review—just more frequent? Actually, no. Ideally, a mid-year performance review takes on another layer of coaching and employee development. It’s an opportunity to give feedback and direction that may not get covered in a once a year performance discussion.
Here are three tips for holding mid-year reviews that respond to the needs of everyone at your organization:
1) Focus on conversation. The mid-year review is not necessarily a goal setting time as much as it is an opportunity for a coaching conversation. It’s a time to discuss with the employee if their goals are still relevant, and to delve into their successes and challenges. Sure, you’ll look at how the employee is performing (and what metrics support that). But overall this is the time to ask, What type of support do they need and how can I help?
Provide employees with the opportunity to share their perspectives and concerns. Then take time to discuss the employee’s development, without waiting another six months to begin. Personal goals can also change throughout the year, so it’s important to determine how you can help the employee attain experiences or education to move toward a desired career opportunity.
2) Avoid comparisons to peers. Part of the dread of the performance management process is the forced ranking of employees. The so-called “rank and yank” system is incompatible with knowledge or service based jobs, where collaborative and non-competitive relationships allow for information to be shared and innovation to flourish.
Forced ranking, or social comparisons, make it more difficult for employees to accept feedback. Researchers at Columbia Business School found that when employees were compared to their peers, employees felt the employee feedback process was unfair because it did not provide specific details about individual performance.
What’s more effective, the researchers said, are temporal comparisons—the “me now, versus me in the past.” The contrast of the same individual at two time periods was seen as a more fair and individualized approach, which made the employee more receptive to both positive and critical employee feedback. Seems like managers should take a page from Hemingway’s book: “There is nothing noble in being superior to your fellow man; true nobility is being superior to your former self.”
3) Separate compensation from the review process. When the goal was to make a certain number of widgets, accurately, and within a short amount of time, it was easy to create a pay for performance system. Today, if an engineer slacks off from making a widget because she’s using initiative to come up with a new device that ultimately works better and costs less, should she be chastised because her original widget-making performance suffered?
If your organization wants to promote creativity and its inherent risk-taking, do you want to only award successful outcomes? As we all now by now, prioritizing rewards instead of learning and innovation can actually demotivate employees.
Compensation does need to be discussed during the mid-year performance review, and some companies are finding success in having a separate compensation discussion towards the end of the annual cycle. Whatever your compensation philosophy, make space during intermediate reviews to help the employee know exactly how they’re performing, so the compensation decision is not a surprise.
People Operations expert, Colleen McCreary, likes a quarterly compensation review, which gives managers the flexibility to have shorter term conversations around goals and outlook. She shares that this is especially important for more junior employees:
“For most companies in tight labor markets, doing a compensation review once a year sets you up to be at a disadvantage. And certainly you are setting yourself up for having to break your pay philosophy. For example, what do you do when someone who is taking on more responsibility and brings in high results doesn’t get recognized, because your system is set up for once a year pay raises?”
Even though mid-year performance reviews are an improvement from annual reviews, two performance discussions a year are still not enough. More than 50% of office professionals surveyed said they would like performance reviews at least once a month, however, most executives (69%) hold them once or twice each year.
Managers may have a blind spot when it comes to performance reviews. The survey referenced above found that 94% of executives were confident employees were satisfied with the current performance management process, while most employees felt the process was outdated and irrelevant. When execs and employees disagree this much behind the scenes, that means employee feedback is failing and proves the point that more frequent communication is needed.
Even some of the more progressive companies that are doing mid-year reviews are missing the boat on continuous performance management. More frequent feedback gives employees the macro and micro view of their performance, enhancing their ability to do the job.
Talent Management Guru Josh Bersin estimates that 70% of multinational companies are moving in the direction of a multisource assessment. But to be effective, managers will have to bridge the perception gap on the need for more frequent feedback.
The foundation for a multisource assessment includes setting the direction on priorities via Objectives and Key Results (OKRs), and then using the data on the progress of OKRs in mid-year and annual performance discussions. In between those reviews are scheduled Weekly Check-ins and 1-on-1s, and ad hoc discussions.
This process as a whole provides the fluidity for changing direction as business needs warrant, provides managers an opportunity to course correct, and coach employees in the moment. When done right, the performance management process can be extremely motivating and can increase employee engagement by building trust and increasing an employee’s sense of purpose.
As you perform mid-year reviews with your team, consider how more frequent and regular performance discussions could benefit your organization. Yes, a continuous performance management process will require some more time and diligence up front, but creating a more engaged and agile team that is ready to handle the dynamics of today’s business environment, will be well worth the effort.
David Mizne is Marketing Communications Manager at 15Five, continuous performance management software that includes weekly check-ins, objectives (OKR) tracking, peer recognition, 1-on-1s, and reviews. David’s articles have also appeared on The Next Web & TalentCulture. Follow him @davidmizne.