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The end of annual performance reviews?

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I read an article recently about companies doing away with the annual performance review process. Has anyone had experience doing this? How have employees embraced/rejected this approach? Lessons learned?
Here is the article I'm referring to: https://www.strategy-business.com/blog/Want-to-Kill-Your-Performance-Rankings-Heres-How-to-Ensure-Success?gko=bc485

Performance Management
Performance Reviews
Management
HR Consulting
People Management
People Development
Bonus Programs
Bonuses
Promotions
Annual Reviews
Daniel Andrew
50 months ago

6 answers

2

I work as a consultant so I designed similar programs. For me, it is important to remember that there are two elements:

  1. conversations we have with employees
  2. conversations we have among the leadership team

As a leadership team, it is still important that we align pay with performance (if that is the foundation of the reward system) and that we document performance over time. It is particularly important that employees get constructive feedback when they are acting in a manner that could damage the company reputation. While I believe most people do the best they can, we are living in an era where careers are being destroyed for poor judgment. It is incumbent upon us as leaders in the organization to ensure employees get the feedback they need to refine their judgment and grow in their careers. We also have a responsibility to protect our stakeholders (investors, customers, community, leaders and other employees) so we need to ensure that everyone gets the feedback they need to not only perform their jobs but also represent the company and its brand effectively.
Most of what I read and have experienced is positive. I have not read much about what needs to happen behind the scenes to ensure feedback is happening. I liked the S+B article and its references to data collection and also training managers/supervisors to give effective feedback.
Maureen Metcalf

Maureen Metcalf, MBA
50 months ago
Thanks Maureen - are there any specific structures or platforms you've seen that have been helpful in driving these behaviours? Or is it more informal? - Daniel 50 months ago
Daniel, we created custom approaches that were highly abreviated versions of what they had in the past to make the transition easier. If you are already using a system, I would say build on (or minimize) what you have that people understand. If you have specific questions, you are welcome to email me directly. - Maureen 50 months ago
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Companies like performance reviews because they want to believe in a 'fair' system of allocating pay/bonuses at the end of the year. But it never is fair.

  • managers are human, and biased, and mostly hate the discussions
  • there is no objectively fair way to compare the performance of e.g. someone in finance to someone in HR - they are just very different jobs
  • performance is never just a consequence of the individual - performance is impacted by context and other people (as someone I used to work with said, were you good or were you lucky?)
  • reviews are always against goals, but goals don't reflect the flexibility and collaboration of most work now

If you want to improve performance, feedback and coaching should just be part of the way people work - you wouldn't expect atheletes to wait for annual or monthly coaching - its nonsense.
In the end performance reviews fail because management fails - when managers manage badly, staff give up and revert to waiting to be told what to do, and judged against random criteria. Work needs to be a partnership conversation. In two previous companies we focused on changing the conversations first - the PR system was too political. Most people got it, but some people were very resistant - managers and staff. Managing more by coaching means putting egos to one side and focusing on the work and joint problem solving -some found that hard. It also requires staff to step up and not just turn up to do a job the way they always have - some found that hard too.

Alan A
50 months ago
Great insight. Some Managers probably rely on the structure of the PR process to help them manage these conversations and the reward/merit for their people. Are there effective ways to make a coaching-centered approach achievable by all managers (strong and not so strong alike)? How do you manage expectations for promotions and raises in terms of timing? - Daniel 50 months ago
Yes - needs coaching though :-) The key switch is a) coaching is about discussing the work, not judging the person b) it's a shared conversation, not the boss having the answers. Promotions and raises have to be separated out. Raises are against market value, and only when company can afford it. Promotions are against capability, not a calendar. - Alan 50 months ago
Agreed; but often more of a risk reduction mechanism. - Dr. David E. 37 months ago
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We are still doing the annual performance review process but at the same time we have employees
and leadership team conversations too as mentioned by Maureen.

Paolo Beffagnotti
50 months ago
An ongoing process - Dr. David E. 36 months ago
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First of all, I only have experience on the user side of a performance management system, either by being evaluated or evaluating my teams.
When I started giving feedback to my colleagues, I quickly found that waiting for the annual performance meeting was never going to do the trick, so I started having more meetings, typically informal and bi-directional, where not only I could set objectives for the individuals (or the teams as a whole), but they could also give me feedback for both my performance and their opinion about where we were heading.
These semi-formal meetings took place on average 5 times per year (1 for objective setting and a quarterly review), but considering our projects were very short (no more than 4 weeks), I realized I wanted to be more proactive, so we ended up scheduling a brief meeting at the end of every project so I could provide detailed and specific feedback to each of the team members.
So, I am convinced, this way of giving feedback is better, because it is much more proactive, and helps your colleagues understand where and what they can improve on the spot, eliminating the feeling of "if you were not happy with this, why did not you tell me before?"
However, I have not yet figured out a way of moving from a formal appraisal and ratings. In all the companies I have worked so far, salary increases and bonuses were linked to performance, so regardless of how many times you organize feedback sessions, at the end of the year, you have to cluster your team members in different groups (exceed expectations, solid performers, etc.).
Emilio Rubio

Emilio Rubio, Ph. D.
50 months ago
Good feedback Emilio, thanks for your insight. I agree that we need to be having more regular performance conversations than once per year. The raises/promotions piece is the one I'm curious to learn more about to determine what it would take to completely move away from year-end appraisals. - Daniel 50 months ago
True DAT. - Dr. David E. 37 months ago
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Many people believe the annual performance reviews is a tool to give impression to your internal customer (i.e. your employee or boss) that you are doing great things when exactly you have nothing to do and living as a parasite to the company. This is era of just in time. A real time review, acknowledgement and respond. It is old way and already obsolete from the schedule of disruptive innovators. Sorry for bad news...

Narayan G
50 months ago
Not bad news! I agree with your real time acknowledgment comment. How can a company best position itself to move away from annual reviews if they are already in this process? How do employers ensure fair treatment of promotions and salary raises? - Daniel 50 months ago
Fire bottom 10%each year - Dr. David E. 36 months ago
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Literature aside, the reality is that annual performance reviews have been dead for nearly two decades.

Randy Vogenberg, PhD
50 months ago
Agreed, usually. - Dr. David E. 37 months ago

Have some input?