Are Annual Performance Reviews Becoming a Thing of the Past?

by Nancy Owen, PHR

Somewhere around the middle of 2015, many large companies decided they would stop conducting annual performance reviews. These companies included Adobe, Google, Deloitte, Accenture, GE, and Red Hat; just to name a few. This change in the mindset of large employers had many other companies following suit and doing away with their annual reviews. The companies believed the reviews did not work, that they were an insult to employees, and that employees felt they were not productive. Employers who did away with the reviews believed their employees felt they were never given real, achievable goals. Instead of giving feedback throughout the year, their leaders waited until the end of the year when it was too late to do anything about it.

These companies quickly realized that simply taking away the annual review process was not enough. Without a process in place, they found that employees seemed less engaged and less productive. If they wanted to successfully eliminate the old way of managing performance, they would need to replace the old with a better system for evaluating their employees.

Performance management is not one and done. More than ever, employees are asking for real-time feedback. It is a yearlong cycle that works only when feedback comes in many forms throughout the year and only after very specific goals are put in place. Goals must be measurable, action-oriented, realistic and time-bound. Managers need to manage the performance of their employees each step of the way, not just at the year’s end.

In order to develop a performance management process that would work for their company, executives needed to spend more time collecting information related to their unique environment and culture.

First, they looked at the advantages of the old way of reviewing employees. Pros included:

  • Provided strong motivation for employees who wanted to challenge themselves by exceeding expectations.
  • Provided a document that the employees can read and refer to over a period of time and gave the company a record of employee performance and conduct.
  • Provided leaders with a structured set of goals to discuss with the employee, allowing them to point out what the employee is doing well and not so well.

Executives also considered the disadvantages. Cons included:

  • The inevitable “rater biases” that leaders can fall into when evaluating employees.
  • Employees thinking leaders are not fairly evaluating them.
  • Leaders becoming overwhelmed by the time-consuming preparation and meetings.
  • Employees becoming de-motivated when given poor feedback in a nonconstructive way.
  • Employees feeling shock or surprise because it is the first they are hearing about poor performance or conduct.

Some of the things that companies want to consider now are:

  • “First thing” stand-up meetings, conducted at the beginning of a shift to communicate daily updates and company or departmental news to employees, so that employees never feel “in the dark”.
  • Monthly one-on-one meetings between supervisor and employee, pointing out what is going well and what is not according the goals and competencies set forth at the beginning of the year.
  • Quarterly and/or mid-year reviews, when any adjustments or changes should take place.
    –  Are the employee’s goals still realistic?
    –  Has the employee moved to a different department or taken on new tasks?
  • Year-end discussions, carried out in a non-formal meeting, to review the last year and what could have been done better or needs to change for the upcoming year.

Many companies are now restructuring and defining their performance management in a way they never have before, but most likely are moving toward getting rid of annual evaluations. They are realizing that they need to increase their communication to their employees about performance and conduct, which in turn should increase the success of employee performance overall. Companies are introducing measures that include one-to-one check-ins, all in real-time.

Yearly evaluations or performance appraisals of any type are only as good as the process followed, the leaders that perform them and the ability of the organization to develop and communicate effective, realistic goals to employees. When these processes are done well, the company will have a greater chance of increasing engagement, accomplishing goals and meeting their yearly plan. It’s no surprise that new generations of employees are changing the way organizations do business. Personal development has become just as important to the new workforce as the company performance goals.

Performance management will most likely continue to see changes in the years to come. The companies that embrace the change and work to have a process that matches their employee culture will be the most successful.

Whichever way you go with performance management, be sure you know your employees and what motivates them. Do your homework and collect data to determine which initiatives work best for your culture, industry and environment.

If you are an employer with any HR concerns, please send an email to HRhelpline@eastcoastrm.com. If you have any questions about East Coast Risk Management and the services we offer, please visit our website (www.eastcoastriskmanagement.com) or call (724) 864-8745.

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