Are Annual Employee Performance Reviews Really Dead?

The dreaded annual review gets a bad rap – in the case of most companies – justifiably so. Frankly, the way most companies handle reviews is awful for managers and employees alike. The problems are myriad: once-a-year-only feedback, the scoring and ranking, tying ratings to raises, discussing goals and performance at the same meeting and one-size-fits-all forms.

In today’s fast moving businesses, goals made at the beginning of the year may have no relevance by the end of the year. Traditional annual reviews, by only being updated once a year, don’t accurately reflect the fluid nature of business. Such static processes also don’t meet the needs of younger workers who expect constant feedback.

Most of all, the way annual reviews are typically handled rarely provides the results a company needs.

With the amount of time reviews take and the poor results that they generate, many high profile companies, such as GE, Motorola, Accenture, Kelly Services, Medtronics and Adobe Systems have ditched traditional annual reviews.

Should your company follow their path? If you kill the sacred cow, what replaces it? After all, everyone still needs benchmarks and goals.

Simpler paperwork and continual feedback

Organizations that have kicked old style performance appraisals to the curb retrain their managers to give continual feedback and rely on significantly simpler paperwork to record performance.

Your first order of business will be to eliminate numerical forced ranking (ranking employees on a bell curve) or peer ranking (ranking employees against each other) used by most performance review systems.  Instead, managers should begin to have structured conversations with their subordinates on a consistent basis.

These conversations can be weekly, monthly and quarterly depending on the type of work being performed. Supervisors will need to begin looking for opportunities to offer guidance and feedback, such as at the beginning and end of an assignment. For longer assignments, supervisors might want to check in with the employee two or three times during the project.

If your managers have a hard time doing this, suggest they schedule it on their calendar until it becomes a natural part of their management style. Give your managers conversation starters they can use. After all, a simple “How’s it going?” may be all that’s necessary to get an employee talking.

Your goal is to make continual feedback ingrained in your culture.

Lead, teach and motivate

Conversations should be forward looking. These are not meant to review the past and all the wrongs that have occurred. Acknowledge employees’ strengths and motivate them. A non-judgmental review might start with, “How do you think the project went?”

When needed, guide your employee in areas where they need to improve. Ask: “Next time, what would you do differently?” or “Have you considered this?” When supervisors help an employee make a course correction before it turns into a problem, it builds trust and ensures the organization’s objectives are met.

These conversations should never be used to encourage competition among peers. Instead, managers should coach, encourage and support their employee in their work. Always focus on the individual’s performance and the company’s needs, not on personal attributes.

Many organizations have teams of employees who work together equally on a project.  When that happens, think through the feedback and encouragement that should be given to individuals versus the group as a whole.

For instance, one team member may be missing deadlines consistently, which affects the whole team. That’s a discussion to have privately. Maybe the individual has too much on their plate or maybe the person needs to be coached on time management. If the entire group missed an important deadline, it’s time to gather the whole team to analyze why and how to remedy any issues.

As managers begin to realize the benefit of these conversations, they will discover many opportunities for the quick, casual conversation. It may be a few minutes at the coffee bar, or when passing in the hallway, or walking out of the building at the same time.

Investment will be needed

Eliminating performance reviews comes with a cost. Be prepared to invest time and resources in your new approach.  Supervisors should be given training opportunities to learn to communicate more effectively and to easily identify resources that will help employees who face performance challenges or who want to enhance their knowledge and skills.

You may want to build a discussion guide for supervisors and employees to explain what wasn’t working about the old system and the goals of the new review process.

Companies should also consider investing in a way for managers and employees to share feedback easily, such as an online program, an app or another outlet that is easy, quick and enhances the ability to give real time feedback when conversations may not be logistically feasible.

It is important that the organization check in with its workforce after the new system has been in place for a time. Conduct employee surveys to determine if the new approach is meeting the organization’s objectives and is effective. Be prepared to tweak the new system based on the feedback you get.

Not ready to give up your annual reviews just yet? That’s OK.

Say you’re not ready to end your current annual review process. What can you change to improve the system, both for your managers and employees?

Before changing anything, consider these questions: Is the review system contributing to your company’s objectives?  How is the system impacting the bottom line? Are you measuring the right things?

First, reconsider ratings that assign employees a number between one and five, the forced bell curves that mandate how many ”3s” and “4s” a manager can hand out, and the lengthy paperwork. Instead, allow supervisors to focus on employees’ positive strengths and their contributions. Encourage supervisors to begin having more frequent touchpoints with their team members.

Next, how about a review form that fits on one page? On the top of that page, work with each employee to create a list of the three to five essential elements of their job. As supervisor, you will give a yes or no answer to whether the employee is performing those essential aspects of his or her job.

The bottom half of the page should list forward-looking goals. This requires a back-and-forth discussion. Maybe one employee would like to learn a new software that could save your department time and money. Another employee would like to graduate to more complex projects. Keep goals broad, realistic and focused on company objectives.

Performance appraisals often focus on specific competencies that can create a “boxed-in” feel. Say your performance review form rates all employees on customer service or sales. It’s highly likely not every employee interacts with customers or is involved in sales yet they are still rated on those competencies.

Creating the opportunity for more flexible discussions allows supervisors to address important characteristics that are usually difficult to measure in our data-driven world such as effort, innovation or collaboration.

Eliminating a performance review system may not be the right move for every company but by simplifying the process and increasing communication, everyone can focus on what their company really needs: Motivated employees.

Discover more ways to motivate your employees. Get our free e-book, How to Develop a Top-notch Workforce That Will Accelerate Your Business.