It’s that time of year again, HR has kicked off the annual performance review process. It’s your opportunity to have irrelevant meaningful conversations full of constructive feedback about your performance over the past year. Or, is it?
Each year managers and employees alike relentlessly complain about what they consider a tedious, unnecessary and unrewarding process. And, guess what? Some business leaders are starting to take notice!
For the past few years, the death of the traditional performance review has been a widely speculated topic among HR folks. Back in 2013, a CEB study found that 23% of HR pros surveyed were satisfied with their organizations’ performance evaluations, which was down from more than 50% the previous decade. Last year, Deloitte made headlines when the organization announced that they were going to do away with formal performance rankings.
In case you missed it, not much has changed this year. IBM, General Electric, Gap and Accenture have publically come out saying they are blowing up their performance review process because it wasn’t producing any valuable information. Let’s explore their rationale behind such a major decision.
Performance reviews put people against each other
An article published on The Huffington Post notes that, “researchers and companies say that ranking people essentially makes them feel bad — and it also pits workers against each other.” Assigning someone a numerical ranking makes people feel threatened, experts say, which is why so many organizations (notably Microsoft) have turned away from stack-ranking systems.
Performance reviews are expensive
Both Gap and IBM have released information citing just how much annual performance reviews cost their organization, and the numbers are startling. After looking at data, The Gap told The Huffington Post they realized employees spent 130,000 hours of time in the annual review process, costing the organization almost $3 million a year. During the Fortune Global Forum last November, IBM Chairman and CEO, Ginni Rometty, divulged that during her tenure the organization has divested $8 billion of the company’s business hours on performance reviews. Both organizations have moved to a more collaborative and less formal review process aimed at providing feedback to employees when and where they need it. Sounds like a dream, right?
What to do before you jump on the anti-performance review train
Adobe is another organization that made a public announcement ditching annual reviews and moving towards more frequent, meaningful check-ins. The idea is to provide relevant feedback throughout the year, so managers can mentor and assist employees as needed. But, hold the phone before you ditch your annual performance review. In a Harvard Business Review article this week, Graham Kenny cautions business and HR leaders to be careful before they make a drastic change. He asks the most basic question: why do employees dislike the traditional performance appraisal? The answer: performance reviews focus on activity, not outcome. Therefore, they can become demeaning. In the article, Kenny offers up two pieces of sound advice to organizations moving from traditional performance reviews to non-traditional check-ins. “Firstly, organizations should look at measuring ‘outcomes,’” and “Secondly, develop reviews based on the relationship each team has or unit has with its key stakeholders.” Dive into the full article for more great advice and examples on how to make this change work!
What do you think – are performance reviews going extinct?