Companies re-imagining the annual performance review
It wasn’t quite the storming of the Bastille, but a fledgling revolution was unfolding this past spring inside the conference rooms of the palm-studded, fairway-lined Trump National Doral Miami.
With a who’s-who of corporate human resources chieftains in the crowd, from Disney to Cigna to Bank of America, a conga line of speakers called for the overthrow of an American workplace institution: the time-tested and usually dreaded annual performance evaluation.
“The conference session on blowing up the traditional performance review was standing room only,” recalled David Niu, CEO of Seattle-based TINYpulse, a software tool for tracking employee sentiment through weekly one-question surveys. “One speaker after another got up and said ‘We blew it up at our company’ or ‘We got rid of it at ours,’ and the crowd was cheering because nobody likes performance reviews; people have started to re-imagine the whole process.”
The way corporate America measures its employees’ performance is being dismantled brick by brick. From the C-suite to the boardroom to the proverbial water cooler, the annual review is increasingly criticized as a negative, time-consuming and outmoded way of sizing up your staff, an end-of-the-year ordeal that instead of helping an employee get back on track can actually do the opposite.
What’s replacing it is a work in progress. But there’s a gathering consensus in the HR world that the traditional review will give way to more frequent check-ins with employees throughout the year, as managers use new tech tools to monitor progress, gauge sentiment, and engage workers with positive feedback.
Larry Sternberg, a blogger and CEO of Talent Plus in Lincoln, Nebraska, said the makeover is long overdue.
“I would like anybody to point to one instance where an annual performance review has actually improved someone’s performance,” he said. “The reason we’re seeing this trend to do away with them is because they require a huge amount of work for an organization and don’t produce value. Finally companies are realizing ‘Why should we keep doing this? It really sucks up a lot of time.’ ”
In theory, annual performance reviews provide managers and employees an opportunity to step back and assess overall performance, and also to determine whether the employee’s work product merits a salary bump or bonus. But reality is quite different: Companies piled more and more onto the process over time, making it take longer and longer. Research by Josh Bersin, principal and founder of Oakland, California-based Bersin by Deloitte, has shown that of 3,000 companies surveyed in 100 countries, only 10 percent said their performance-review process was an effective use of their time, while 50 percent said it was of no use at all.
As a result, he said, more than half the companies surveyed are either in the middle of redesigning their system or planning to do so in the next 18 months.
Also on the way out is an even more-despised evaluation tool: performance rankings, which firms such as Microsoft used to measure employees against each other. Chris Cabrera, CEO of San Jose, Calif., software firm Xactly, said he’s done away with annual reviews at his company and replaced them with more regular feedback sessions, and “we’re helping other companies do the same. So many employers are still using an annual-review process that was popular before we put a man on the moon, but they’re now such an old-school way of thinking. As a manager, I hated doing them.”
Other factors pushing the trend include the advent of new tech tools to track performance in real-time. An entire cottage industry of review-management software has sprung up, including products like Small Improvements which offers employees an online interface to define short- or long-term goals as well as automatic reminders, according to its website, “to keep people on track, and managers in the loop.”
Bersin said there’s also the need in a highly competitive market to use positive-reinforcement systems that keep employees, especially millennials, engaged and up to speed on how they’re doing.
“We’re entering a very tight labor market, especially here in Silicon Valley and the Bay Area, where having a performance rating once a year can be degrading and cause people to leave,” said Bersin.
Ongoing feedback makes the employee feel valued, they found.
“When you look at exit interviews, the overwhelming reason people leave jobs is because of their manager, not because of compensation or their commute,” said HR consultant David Lewis, CEO and founder of OperationsInc, Connecticut’s largest HR consulting firm. “And when you dig a little deeper, you often find that what’s missing is feedback — it’s that feeling that my manager is not communicating well with me and so I don’t know where I stand.”
Some tips on improving the
annual performance review
■Eliminate all checkboxes and numeric scales. “Performance is more complex than that,” said Stephen Balzac, president of organizational development firm 7 Steps Ahead. “A good system needs to highlight significant incidents, provide clear examples of positive and negative behaviors, and include specifics.”
■Provide feedback on things the employee can change. Avoid talking about personality traits or characteristics they can’t change.
■When giving negative feedback, focus on specific incidents and examples. Talk about your impressions and feelings, and never make judgments about what’s going on in the employee’s head, for instance, by saying: “You clearly don’t care about this project.”
■Don’t set up your team members in competition with one another.
■Focus on strengths more than weaknesses.
■Don’t forget about intangible behaviors. “It’s hard to rate behaviors like helping a team member or boosting morale. Reviews need to be more holistic and find ways to take into account nonobvious team-building behaviors. The person who helps keep everyone else’s mood up when things are tough is appreciated, but not really noticed — until they’re gone.”
Source: Society for Human Resource Management and Stephen Balzac, president of organizational development firm 7 Steps Ahead