How Will You Replace Your Annual Performance Review?
The world of performance management was irrevocably shaken in July of 2015 when Accenture announced that it would abolish their annual performance review process. These assessments will be replaced with “a more fluid system, in which employees receive timely performance feedback from their managers on an ongoing basis.”
Accenture wasn’t the first to kill their company employee reviews and they certainly won’t be the last. According to The Washington Post, nearly 10% of Fortune 500 companies have abandoned annual performance reviews. Judging by all of the research suggesting that performance appraisals do more harm than good (and the scorn from both managers and employees), we are sure to see that percentage grow.
Q4 is not that far off, and companies leading the charge on this progressive shift will soon have to answer this question:
How will you replace your annual performance review?
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Every month we publish a thematic roundup of our favorite articles on topics ranging from leadership to company work culture. This month we bring you these 5 articles to help you make an educated decision on one of the most important aspects of performance management:
By: Max Nisen
Former CEO Jack Welch championed General Electric’s “vitality curve”, a rank and yank performance management system where employees were given a performance-based number at review time and were then compared to their peers. The lowest 10% were fired. How’s that for a stressful way to conduct employee reviews?
GE abandoned this practice years ago but now they are abandoning employee reviews altogether, with more regular feedback surveys via an app called PD@GE (performance development at GE). GE’s current head of Human Resources, Susan Peters stressed that millennials are driving some of this change. They are used to receiving employee feedback more than once a year, and annual reviews just aren’t enough to manage people and boost productivity.
By: Donna Wiederkehr
The tagline for this piece says it all: “The most innovative teams are evolving every day, not once a year”. But let’s dig a bit deeper anyway.
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Donna knows that improving communication in the workplace is key; sharing the company vision, getting clear on short and long-term goals for work, and providing real-time performance feedback. Feedback from employees can provide innovative ideas or problems unseen at higher levels of the organization. Feedback from leadership and management allows for coaching, providing motivation, and maintaining a strong organizational culture.
In this three minute video, Dartmouth Professor of Strategy and Leadership, Sydney Finkelstein shares research findings on why so many companies are suddenly deciding to kill-off reviews. For one thing, performance evaluations have many flaws. One study revealed that whether a manager hired or inherited an employee biased their review. For another, cut-throat environments that use rank and yank systems tend to alienate high potential employees who are seeking a more supportive work culture.
The time for this is ripe since there are several performance management software solutions available for improving productivity and tracking employee performance. Managers can even use mobile apps to keep a finger on the pulse of their employees, while providing them with space to be their most creative.
Of course not everybody is a fan of this shift.
Annual reviews are often criticized for being unreliable and counter-productive. Employees spend the months leading up to them politicking for position instead of doing actual work. Gobry says that nothing will change because people will still have to be reviewed via metrics. Replacing performance measurement metrics with new ones will continue to demotivate or frustrate employees, who will respond with new methods to game the system.
Gobry says that continuous employee feedback which will replace the review, is tantamount to constant pressure. “Getting rid of yearly performance reviews might just end up with employees getting the equivalent of a yearly performance review every week”. Of course he is making an assumption about feedback. In this new paradigm, weekly feedback is far more likely to provide managers with visibility so that they can support their employees.
By: Peter Fleming
No, I am not just trying to squeeze Amazon in here because it’s trendy (although we did publish a great blog post about them last week). This article provides a detailed history of competitive, data-centric performance management.
It all began with Frederick Winslow Taylor, a management consultant who observed steel factory workers in the early 1900’s. He measured every part of an employee’s job, then ranked each worker’s output individually and rewarded them accordingly. Taylor was worried that if employees hid their behavior from managers, they would end up controlling the production process rather than supervisors.
Employees clearly have a problem with this – not because they are trying to hoard power, but because managers are so concerned about what the performance measurement metrics say. “Employees compulsively compare themselves to others, usually in a state of anxiety. Getting the job done well becomes a secondary issue.”
Industrial revolution thinking no longer applies today when a new generation of workers demands more from their leaders. Today’s markets move too quickly for managers to check-in with employees only once each year, especially with research that shows how valuable regular employee feedback is for improving performance.
Changes in management strategy like these can be hard to implement, especially for large companies. Even if you aren’t ready to shed annual performance reviews altogether, at least augment them with weekly employee feedback sessions and a strategy for coaching staff. You have a clear choice, cling to outdated command and control performance management or step into the new world to engage and inspire your employees.