Rethinking Your Annual Performance Review Process

Einstein said that insanity is doing the same thing over and over again, and expecting different results. For years now, managers and employees have repeatedly trudged through their annual review process - grading people for past performance instead of improving it in real time.

The world of performance management is evolving rapidly, but the way we manage our people hasn’t yet caught up. Many business leaders are still relying on old management practices that are no longer effective, or worse, that actually contribute to challenges with employee productivity.

Successful business owners like you can no longer rely on the most important conversations between managers and employees happening only once or twice a year. As the marketplace has become more rapid and complex, you need to adopt new management models to survive and outpace your competitors. We have compiled this comprehensive list of resources on annual reviews, complete with statistics, case studies and links to articles from performance management experts.

David Hassell
David Hassell
Founder, CEO
1.

Annual Employee Reviews for the New Millennium

Performance reviews are designed to essentially grade employees based on their performance. That data is often processed by an outsider, someone on the HR team or a level or two above the employee’s manager.

Why not actually improve performance in real-time? This task, and nearly everything else that impacts the employee’s experience happens locally at the team level. Team managers impact progress, collaboration, productivity and team success. HR departments and the C-suite may set policy or overarching objectives, but the actual impacts occur between managers and their direct reports.

Fortune 500 companies like GE and Microsoft are replacing their annual employee reviews and ranking systems with consistent feedback and coaching conversations throughout the year. In doing so, they are cultivating the right culture of engaging, nurturing, and retaining top employees.

2.

Origins of the Annual Performance Review

For nearly everyone working today, annual performance reviews are as status quo as coffee breaks and bi-weekly paychecks (direct deposited of course). But have you ever wondered what incited this practice in the first place?

Keeping Performance Reviews

Of course some companies aren’t ready to shift away from performance reviews. In the interest of presenting a balanced argument, here is the dissenting opinion:

3.

Performance Review Examples & Tips

There is some variety in the annual review process. Here’s some advice, if you absolutely insist on doing things the old fashioned way:

Performance Review Examples & Tips for Managers

Performance Review Examples & Tips for Employees

As an employee, you probably don’t have that much leverage to change your company’s review process. Here are some links so that you don’t come to your evaluation unprepared:

4.

Negative Impacts of Employee Evaluations

There have been some interesting findings in the last several years. The Psychological Bulletin reported that 30% of reviews actually decrease performance. And a Society for Human Resource Management survey found that 90% of reviews are painful and ineffective.

Negative Impacts

Most companies have an annual or semi-annual performance review process where managers provide structured feedback to their employees. While effective in theory, these irregular check-ins can seem like token efforts which yield few tangible results on overall organizational communication.

5.

Research & Data

Did you know that the number of employers that are either ditching stack ranking or the entire performance review process has grown from 4% in 2012 to 12% in 2014, according to a Corporate Executive Board survey of Fortune 1,000 companies?

That little tidbit was shared by the Society for Human Resource Management.

Here’s More Data Around The Impact Of Annual Evaluations On Employees And Managers:

Stanford University Researchers Analyzed the Language in 125 Performance Reviews from a Tech Company and Found Something Disturbing

  • Managers are nearly 7X more likely to tell male employees that their communication style is too soft.
  • Women receive 2.5X as much feedback related to their aggressive communication style in annual reviews.
  • Women's employee evaluations contain 2.39X the amount of references to team accomplishments, as opposed to individual ones.

How Performance Reviews Can Harm Mental Health

How Big Data Can Take the Pain Out of Performance Reviews

Is It Time to Put the Performance Review on a PIP?

  • Furthermore, about 66% of employees say the performance review process interferes with their productivity, and 65% say it isn’t even relevant to their jobs, according to a CEB survey of 13,000 employees worldwide.

More US Companies Moving Away from Traditional Performance Reviews

What Employees Think

Who wants to be scrutinized and risk being told that they are inadequate by what they see as unfair representations of actual performance. Plus many reviews are accompanied by rating and ranking systems. When people directly compete with each other for rewards, collaboration suffers.

6.

The Problems with Annual Performance Appraisals

In 2015, Deloitte announced that they would reinvent performance reviews based on findings that “the best team leaders revealed that they conduct regular check-ins with each team member about near-term work.”

Companies that remove ratings are seeing the conversations shift from justifying past performance to thinking about growth and development. Their employees are happier, which encourages more engagement and better performance.

Pioneering Companies

You may decide to follow the 10% of Fortune 500 companies who have abandoned reviews in lieu of regular weekly conversation via employee feedback software. Armed with this information you can streamline your business to be a place where employees and managers all react to information in near real-time, and mobilize rapidly to respond to changes, innovate, and stay two steps ahead of the competition.

7.

A Performance Review Alternative

Below is a great option that others have found as a successful replacement to traditional annual reviews. Your company may not be ready to get rid of them altogether, but this is an excellent way to augment your evaluation process:

Step 1. Weekly One-on-Ones:

Managers know that high employee performance comes from empowering people and not micromanaging them. But if you're no longer in complete control of the plan of action, how do you stay apprised of what's really going on with your team and in your organization?

Ask employees questions every week to stay informed and address issues with performance, engagement and culture:

Here are the 5 best questions to ask employees during weekly check-ins:

  • 1) What’s going well in your role?
  • 2) What challenges are you facing? Where are you stuck?
  • 3) On a scale of 1-10, how happy are you? Why?
  • 4) Provide one idea to improve our product or service.
  • 5) What are your top 3 priorities for next week?

Step 2. Quarterly Performance Snapshot:

So many companies break up the year into quarters. It’s a natural time to look at company-wide financials and either reaffirm or reassess goals. Managers can use this time to look back on the conversations that took place over the previous 3 months. They can see how employees performed relative to their quarterly goals, and discuss concerns for the coming quarter.

Step 3. Separate Compensation Review:

You might be asking yourself, How will I know how to promote and increase compensation without a formal process every year?

The answer is to decouple the appraisal from the compensation review. Performance based compensation and promotion decisions have to be made every year, but wrapping that together with coaching and feedback to improve performance is a bad idea. We end up with a counter-productive process where trust is eroded.

8.

Replace Reviews with Weekly Feedback

At best, highly competitive environments and traditional performance reviews and ranking systems produce a form of extrinsic motivation. This is accompanied by a sense of pressure, fear and competition between colleagues. These negative side effects have been proven to actually shut down people's ability to be highly creative and collaborative.

In today's knowledge-worker economy, the type of work that's becoming most highly valued is creative, innovative and collaborative. The age old competitive advantages of hard work and efficiency are now simply table stakes. Breakthroughs that set a company apart in the marketplace now require new ways of thinking, acting, and working together. That only comes from people who are open, connected, and inspired to produce their very best work.

If you are interested in actually improving productivity and engagement (instead of just measuring it every 6-12 months) then you need to create a drastic change to inspire each employee and keep him/her focused on the right outcomes every week.

15Five helps managers celebrate wins, remove roadblocks and discover great ideas in just minutes each week. More about 15Five.

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