Finally, one can only hope that 2015 will see the death of the “annual performance review.” These bloated, over-engineered, mandatory rituals are a waste of time, are hated by everyone and actually do nothing to foster high performance.
—Patty McCord, chief talent officer at Netflix from its inception through 2012
Replace Annual Appraisals with Continual Check-Ins
Performance reviews in the industrial economy were an annual ritual, often despised by employee and manager alike. A backward-looking system would seek to align past performance feedback with current value. A single score often determined a year’s compensation. Forced-ranking systems outweighed future potential.
Performance reviews in the connected economy are characterized by regular check-ins, not an annual event. Forward-looking discussions are focused on future improvement, as part of a continuous learning program. Ongoing check-ins make performance—not compensation—the focus of discussions.
- 58% of executives believe that their current performance management approach drives neither employee engagement nor high performance.
- 89% of executives recently changed their performance management process or plan to change it within 18 months.
Performance Management Serves Greater Cultural Objectives
Many talent management programs are recognizing the importance that performance reviews can play in driving company culture and employee engagement, both of which are assuming greater importance in the connected economy.
Performance management is being reinvented for a new, forward-looking purpose: to serve as an efficient, focused business process that improves employee engagement and drives business results. They tend to focus less on evaluation and more on agile goal setting, regular feedback, coaching, and development. They shift the focus away from forced distribution rankings and much more toward helping managers coach people to succeed.
Focus Employees On Performance not Pay
Annual reviews also tend to be directly linked to compensation decisions. Inevitably this means that discussions are focused primarily on an employee’s level of pay rather than on useful feedback, coaching, and performance improvement.
Informal Check-Ins Deliver Real-Time Improvements
Many companies are finding regular and less formal feedback to be more effective than scheduled reviews. Employees appreciate the opportunity to provide ongoing input, while any performance issues can be identified and addressed in real time.
High-potential young employees want regular feedback and career progression advice, not just “once and done” reviews. And companies are finding significant gaps in leadership and capabilities that need to be addressed.
– Global Human Capital Trends 2015 by Deloitte
In a separate study, Gallup found that employees whose managers hold regular meetings with them are almost three times as likely to be engaged as employees whose managers do not hold regular meetings with them.
Great managers don’t just tell employees what’s expected of them and leave it at that; instead, they frequently talk with employees about their responsibilities and progress. They don’t save those critical conversations for once-a-year performance reviews.
– Harvard Business Review
Agile And Transparent Goal Setting
OKR (Objectives and Key Results) is a system originally developed by Intel and subsequently adopted by companies such as Google, to bring simplicity, transparency and efficacy to the practice of goal-setting and evaluation.
Google sets OKRs at a company level, team level, managerial level, and personal level. They all work together to keep the company on track. All OKRs from Larry Page on down are public with the company to help employees understand what colleagues are focused on and build a sense of shared purpose and commitment across the company.
The grading process is designed to take only a few minutes, with the emphasis being on the benefits of the process rather than the scores themselves. OKRs are not used by management to determine promotions, instead they provide a simple and straightforward list of items to help employees focus on doing their job.