Annual Performance Reviews seem to be on the way out! The internet is awash with stories of organizations stopping the execution of Annual Peformance reviews. Deloitte, Accenture, National Australia Bank, GE and more have all come out publicly to say they are doing away with them.

As someone who has managed people, for more than 15 years, I think this is a welcome move. I believe annual performance reviews are a crutch for a bad manager that really only provides marginal benefits to managing and leading a team unless there is really no other feedback happening. In addition they mostly fail in reaching its primary aim which is to help team members excel over time by providing them with feedback.

Crutch for a bad manager

Lets face it the role of a good manager is to constantly communicate with his/her team which also includes constantly seeking and providing feedback. By doing that you can identify issues early and coach the way to a better outcome, you can quickly identify great behaviour you can encourage and overall you can steer your team in real-time not just once a year.

Annual performance reviews provide a crutch for a bad manager who is incapable of doing that by allowing them to hide behind a process. Some managers believe that if they have followed the HR process, and performed performance reviews once or twice a year, they have done a great job. The problem is that such an approach means one of the largest costs at most organizations, people, may not be performing at their peak for large parts of the year and you will not know until the end of the year.

Annual performance reviews are a time waster

The other issue with annual performance reviews is that they take an extraordinary amount of time to complete on all sides. This is especially true if you want to have them reflect all the efforts over a prolonged period of time as well as a year of feedback on all of those efforts. Of course this could be rushed, in which case the value declines even more, but time is still lost on all sides and cutting corners generally makes performance reviews even less valuable.

All told I would say annual performance reviews are a multi-day process in terms of man hours and we have not even discussed the challenges of how different cultures comprehend the fixed rating systems.  Organizations are spending massive amounts of money to support an approach I would argue is not really helping them to compete better.

What should we be doing?

In my opinion we need to create a lightweight organizational process that drives continuous feedback between the employee and the manager. If we can automate and capture that then we can also detect trends over time. these trends will show the employee how their manager sees their progression and show the manager how the employee feels about the working environment including their manager. If some of that feedback can be provided anonymously and aggregated across a team it could encourage a more open feedback loop. HR and others can then look at that and see the current sentiment in the workforce at any point in time rather than at predetermined points which might be too late!

For good managers this will augment the continuous discussions they are having today, providing a formalization of how they are doing things today, and free them from the end of year annual performance review scramble.

For bad managers it would force them into working with their staff on a more continuous basis. This extra information on a continuous basis could turn them into better/good managers and help them to get their teams performing at a higher level throughout the year.  It could also help them to see where they can improve their skills which is a win-win all around. Of course it may also highlight some people that are simply in the wrong role and allow the organization to adjust quickly if required.

Final Thoughts on annual performance reviews

The death of the annual performance review cannot come quickly enough for me. Our digital workplaces are now moving too fast to think that sitting down with staff once or twice a year is sufficient. Managers need to be involved in a continuous dialogue with their teams and they need technology and processes to help them capture and monitor that dialogue. The most important feedback on what is happening at a company, what is working well, what can be improved and much more comes from people. The problem is we still do not really capture and track that information over suitable time periods to enable us to steer things rapidly in a different direction if needed.

What are your thoughts? Are you a fan of performance reviews? What do you think works well and works not so well? What do you think we should replace them with?

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