Annual performance reviews are dying a slow death in businesses across the country. The annual review of old is time-consuming and often lacking in relevant performance measurements.
But what should take the place of this dreaded process? Many companies are turning to continuous performance development, also known as continuous improvement processes, to build morale and improve productivity.
The transition isn’t without challenges, however. The concept of continuous improvement can feel uncomfortable to managers reared on a rank-and-yank system, or those who are simply too overloaded to provide regular coaching to their team.
Before you ditch your existing annual review model, you’ll need to get clarity on things like:
- How performance and compensation will correlate, especially if you’re not evaluating employees on some scale
- How you’ll measure improvement in underperforming employees, or motivate individuals to climb the career ladder and learn new skills
Transitioning to a continuous improvement model for employee performance and development is a process, not a one-and-done implementation. The main thing you must realize is that there’s no magic fix as you move from once-a-year reviews to continuous improvement.
First things first
Before making the change to continuous performance management, you’ll first need to determine what worked and what didn’t work about your annual review process. You may use a Six Sigma process, focus groups, scale diagrams or plain, old-fashioned brainstorming to determine this.
It’s key to involve employees from all levels of the company to ensure you get a complete picture of what is motivational and effective – and what’s not. You may also need to hire an outside consultant to organize and facilitate these discussions, or guide you in the transition.
Some questions you can expect to address are:
- If we don’t rate employees on a scale (e.g., 1-5) how will raises and bonuses be calculated?
- How will we measure and track information related to an employee’s performance, to judge both promotions and terminations?
- How do we build a system that’s relevant to all positions company-wide?
- What’s realistic and achievable for managers and employees alike?
- Will new technology be required, and what will it cost?
Once you identify the barriers to success in your old system, you can build a new structure that offers a better return on the significant investment of time and resources any performance analysis requires.
Build in flexibility
Old-style annual reviews that focus only on individual performance often fail to accommodate the realities of today’s workforce. Rather than operate in silos or on an assembly line where one task is independent of another, employees now tend to work on a fluid mix of teams and projects throughout the year.
So, how do you capture the quality and value of an employee’s work under such changeable circumstances? Your new continuous improvement model should acknowledge that an employee’s goals may change throughout the year, as they are assigned new priorities.
Perhaps the most important point to creating a performance improvement process is that it should be relevant to every single employee.
For instance, say your company decides everyone should be focused on and judged by their contributions to”innovation.” Is it realistic to expect a payroll clerk to contribute to innovation?
Whether you use your existing review forms and system or adopt new ones, you’ll need to let both managers and employees track conversations, make notes on coaching sessions, ask questions of one another, and give or request feedback.
The frequency of these notes and interactions may be prescribed, such as once a week, twice a month, after the close of a project, etc. The key factor is that the employee gets feedback on their performance regularly, rather than once a year.
Invest in manager training
If you decide to move your company from annual reviews to continuous performance improvement, expect to invest in additional training and development for your people managers.
Particularly if you have micromanagers or leaders used to relying on fear to motivate their team, you’ll need to help these supervisors learn a more positive management style.
Your managers may need coaching tips, conversation starters, tips for realistic goal-setting and guidance on ways to handle performance issues that coach toward improvement.
For instance, rather than ask, “How’s it going?” a supervisor may need to ask more specific, project-related questions. Examples might include “How’s the X project going?” or “Are you running into any roadblocks I can help you with?”
You’ll also need to give managers specific targets, such as meeting with each employee every two weeks to talk about goals and coach them toward better performance. Be sure to outline requirements for making notes about these conversations. If your company uses a particular platform or software for keeping record of biweekly meetings, provide your managers with instructions for logging into and using the system.
Ideally, these records will be accessible by both the manager and the employee.
This type of system makes it easier to communicate important reminders and keep everyone on track. It also creates a paper (or paperless) trail that allows managers to reward exceptional performance or build a case for termination, should that become necessary.
Address manager overload
It’s important to be realistic about what your managers can realistically handle when replacing annual reviews with a continuous improvement process.
There’s no way any single manager, no matter how skilled they may be, can offer guidance, coaching and analysis for 100 individual employees.
So, if you’ve got a flat organization with a few managers responsible for the work of dozens of employees, you will likely have to restructure into smaller teams, at least for the purpose of continuous improvement.
Making the switch
Before you switch from an annual review process to a continuous improvement model, you’ll need to communicate the change to employees at all levels. This change will require a culture shift from everyone in your organization.
Instead of setting goals once a year and not revisiting those goals until next year’s review, you’re asking leaders and employees to commit to a new style of working. It’s more collaborative, more flexible and more motivational, but it’s also new.
And, if you invest in new software to manage the process, you’ll need to provide training so that everyone knows how to use the new system.
The idea is that you’re building a relationship with each employee, top to bottom, that allows everyone’s contributions to be recognized throughout the year, not just once a year when it’s time for raises.
Discover more tips for motivating your workforce when you download our free magazine, The Insperity Guide to Employee Engagement.