As the New Year begins many organisations aim to complete their yearly Appraisals or Performance Reviews. It is a time to calibrate results, check the distribution curve and hand out any bonuses before the end of the financial year. However, in the past few years much has been written about the demise of this tried and trusted method of performance management. But is the death of the appraisal myth or reality?
There is a copious amount of evidence and research that show definite changes to trends in the way that many large organisations implement their performance management processes.
Management research firm CEB in 2015 found that six percent of Fortune 500 companies had abandoned any form of ranking systems. An often-quoted example is Accenture, who in 2015 disbanded rankings and the once-a-year evaluation. It has replaced it with a more fluid system, in which employees receive timely feedback from their managers on an ongoing basis following assignments and projects.
In their research the CEB calculated that the average manager spends more than 200 hours a year on performance review related activities. These involved attending training sessions, preparing and conducting the actual review and completing the necessary forms. Along with the cost of performance-management technology itself, CEB estimates that a company of about 10,000 employees spends roughly £28 million a year conducting reviews. No wonder there has been an ever-growing trend of putting performance reviews under the microscope. Indeed, Deloittes, Expedia, Microsoft and Gap are among many other organisations now following in the footsteps of Accenture.
But is there another side to this story? This change in approach is not about “throwing the baby out with the bath water” but a way of re-focusing the energy of an organisation and its people to meet the demands of the changing nature of work. So what exactly has changed that means we need to step away from the annual performance review and become more agile and fluid in the way they are conducted?
- Setting 12 month goals may not be as relevant in today’s world of work. Many people need goal cycles of 3 months, 1 month or even 1 week
- People are often involved in multiple teams. The manager may not even get to see or understand everything their individual reports do, so may not be best placed to be the only person to offer feedback on performance
- The increase in global offices and remote management often mean that planning getting together for a review is often difficult and sometimes a total barrier to the meeting happening at all
- Distribution curves force managers to only give a few people within a team top ratings and as a result colleagues may start to directly compete with each other for rewards, thereby having a direct negative impact on collaboration
- People are more likely to have open and honest communications when they are not worrying about or trying to justify ratings. Early indications from current research show that this leads to faster skill development than under the once a year system
- Millennials are motivated by learning and career growth. They respond positively to more frequent communication, actively seeking out feedback rather than waiting for the annual review. Studies show that on-going communication helps with employee engagement and development as managers better understand how their people are performing
What is fascinating about the debate around performance reviews is that in 2016, CEB conducted a further study and found employees, particularly high performers, had become disengaged when performance reviews were no longer implemented within the organisation. The study of employees and managers at global companies, found the move away from performance ratings had resulted in a 28 per cent drop in the productivity of high performers. Whilst managers felt under less pressure from not having to do the yearly review they also felt less connected to their people and the perception from the employees was that the quality of conversations was significantly lower.
So what is the way forward for reviewing performance in 2017?
At Change Gear we are big advocates of timely and frequent, high quality “performance conversations.” No saving up the feedback for the annual review but managers regularly engaging with their people to talk about not just what they are doing but how they are doing what they do – less “task police” and more “thought provokers” with the aim of improving engagement and performance.
We regularly run workshops that allow participants to practice the art of “performance conversations” using our highly talented team of actors. The sessions focus on real time dialogues; exploring how the reviewer can create a climate of trust, support and healthy challenge that will help people fully realise their potential. Participants leave the sessions feeling confident to have conversations that are meaningful, sincere and provide the groundwork for future success – no form ticking required!!
So is 2017 the death of the appraisal? Well maybe the death knell is finally sounding for the dreaded once a year, sit in a room with your manager being bombarded by feedback but hopefully the birth of something that connects people, fostering real collaboration and growth.
If you would like to know more about the work, we do in helping people have quality “performance conversations” please get in touch with us at firstname.lastname@example.org we would love to hear from you.