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The Annual Performance Review is Dead: Long Live On-going Feedback

April 11, 2019

What is the worst kept secret in most companies? Traditional annual performance appraisals illustrate the farcicalities and nonsensical nature of organizational life. Regardless of title, manager or individual contributor, there is almost universal disdain for the traditional review process.

The annual performance review process has many common concerns, such as subjectivity, surprises to the employee, time-intensive, demotivating, destructive to trust, retention and performance. Last, the process becomes less about performance and development and more of a vehicle to justify compensation decisions. The annual performance review currently serves too many masters and is about as outdated as dial-up. Static... dial tone... more static... repeat.. .finally connected.. .internet. Can you imagine still functioning in business using dial-up? No. It is time to make the change, and some companies already have.

Here are some scary facts provided by OfficeVibe about performance reviews:

  • 90% of appraisals are painful, don’t work and they produce an extremely low percentage of top performers.
  • Only 8% of companies report that their performance management process drives high levels of value.
  • 58% of executives believe their current performance process does not drive employee engagement.
  • Companies that move to regular feedback have 15% lower turnover rates.
  • 44% of employees do not believe their boss is honest during the review process.

Recently, a company I am working with acknowledged that their annual review process is a way to check the compliance box. They do not use the data collected from it for succession planning or for understanding where to target their training. In a survey of their employees, not one person was satisfied with the process or found it useful. However, they held on to it because they lacked another way. Change is scary. What happens if we stop doing annual reviews? How do we justify compensation decisions? Will employees work as hard? How will we justify HR decisions without that documentation?

Companies such as Adobe, GE, Cargill, GAP, Dell, Microsoft, Oppenheimer Funds, Eli Lilly, and Google have all moved away from the traditional review process. These companies have moved their time, energy and resources to developing employees rather than evalu­ating employees. In essence, they moved from dictating to coaching. Each of these organi­zations reported good results. However, good results do not occur by accident. If you are going to make a move as well, it is essential to think through a few issues first.

It is not about the form or the process

One of the main reasons the traditional appraisal process failed has less to do with the process and more to do with those engaged in it. Managers struggle to have candid, trans­parent conversations regarding performance. To be fair, most managers have never been truly trained on how to have these types of conversations. Organizations tend to focus and invest in the form and process rather than the skill-building needed to employ the form and the process. Quite frankly that investment strategy is upside down. We can use a metaphor about learning to drive and demonstrate this. Would you give a person who has never read a book on how a car works, another on the rules of the road and then hands them the keys to a stick shift and say, “Go for it!”? Not on your life, and the reason is crystal clear. The new driver would destroy the transmission or get into a wreck pretty quickly. The car is the tool; just like the form is to the appraisal process. The books are the documentation of the process; however, one of the most critical aspects of driving is the learning process. We send our kids to driver’s education to learn. We make them drive in empty parking lots. We provide learner’s permits so they may receive coaching from an experienced driver. The performance appraisal process is no different. Our managers are not prepared to hold these crucial conversations. Moving toward a more coaching type of a process only heightens this lacking skill set. We need to support managers becoming better coaches by investing in adequate training.

One-way streets are not efficient or effective

Performance appraisals are very much a one-way street. All too often we see managers that are unaware of constraints and barriers that exist, workload imbalances and more. Managers are supposed to support their people and to help them achieve. However, that is an impossible task when managers manage blindly. The annual performance process fosters limited sight and knowledge.

All of this data and so little wisdom

After every employee finishes their appraisal, the organization should be swimming in a treasure trove of data. Unfortunately, most organiza­tions collect these documents, use them to justify compensation decisions, and place them in personnel folders. Talk about trading the strategic for the tactical. Managers treat annual perfor­mance reviews like a transactional event rather than a strategic process.

Make it powerful

In the end, every organization needs feedback to create growth, opportunity, and strengthen individuals as well as the organization. If it were easy to do everyone would have it figured out by now. Many organizations are experimenting and trying new things, but there are some lessons learned and themes that are developing.

  • Keep it simple. If the process is cumbersome and time-consuming, no one will adopt it, and it definitely won’t be sustainable. Less is more.
  • Have a purpose. Clarity on why the organization has taken this process is central to its success. Do not try to do too many things using this process.
  • Drop the top-down approach. Create a two-way conver­sation where employees have a significant voice. After all, if we want them to take ownership of their performance and development, we must make them partners in the process.
  • Focus on a process, not an event. Employees need real-time, regular feedback. That means meeting at minimum quarterly with employees and then at key moments when feedback or a conversation is pivotal. Once a year is dead!
  • Growth and development trumps performance. Perfor­mance is a reflection in the rearview mirror. It is about the past. Future performance is about living up to your potential. Conversations need to focus on employees getting stronger and better more than on evaluation.
  • Remove compensation from the discussion. Compensation can be handled separately and outside this process. When you include compensation, it clouds the entire conversation and removes transparency.
  • Location, location, location! Or in the case of this infor-mation...access, access, access. People want to have access to this information anytime and anywhere. Technology allows us to promote better use of information such as asynchronous conversations and coaching, remote conversations and real-time conversations. All of these uses drive performance, retention, learning, and problem solving regularly.
  • Culture-building and training are essential. To make this change and make it work companies must build coaching cultures. Organizations will need to train existing managers how to hold coaching conversations, hire on-board and promote people that have coaching capability into managerial roles, and be willing to say goodbye to those that can’t or won’t adapt to the new approach.

Like any shift, dropping the traditional review and moving toward on-going feedback is a change. The thought of this shift may be enticing especially since what we are doing right now is not working. However, making the shift without investing can make it worse. Direc­tionally, when things are changing, your organization will have to as well. However, timing and how you approach it should be based on where your organization is now and their appetite for change. Don’t copy others to join the latest fad. Adapt in a manner that leads your organization to more, sustainable success.