Traditional annual performance reviews date back to the beginning of the 20th century and the birth of larger organizations, when employees were viewed a bit like interchangeable parts in a machine. Annual performance reviews were the annual servicing — to evaluate them and replace the defective ones if necessary.
As many as 95 per cent of employees are dissatisfied with their employer’s appraisal process (SHRM). Two thirds think annual reviews are a waste of time.
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As a compliance process, they have a ritualistic feel, like a dinner party everyone has to sit through without enjoying the food. At worst, they’re counter-productive to business development, inhibiting innovation and cooperation within teams.
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When organizations overhaul or get rid of annual performance reviews, they see improvements in employee morale, retention, and creativity. Adobe replaced annual reviews with check-ins and reduced employee turnover by 30 per cent. Startups like EverFi are eschewing the classic APR altogether, building in better communication throughout the year (SHRM). Zest has been doing this for over 3 years with monthly check-ins.
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The covid-19 pandemic has made these issues particularly stark. All of us have to rethink our way of working.
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Is it time to ditch annual reviews altogether?
The answer may not be so simple.
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Indeed, performance reviews are the lynchpin of important HR decisions: promotions, terminations, training, capacity building. And there are other issues to consider: getting rid of annual reviews altogether can be tricky, particularly in France or other European countries where they’re required by agreements with unions.
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At Zest, we believe a successful annual performance review can benefit everyone if it’s part of an HR mechanism of much more frequent conversations and listening to your team members.
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How can you improve performance evaluations to make them work for people and growth? We suggest 4 ways of addressing the major problems with annual reviews. You’ll see that our solutions are workable and highly beneficial for growth!
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Problem 1: lost work hours, low rewards
Are annual performance reviews a vampire that feeds on the time and morale of your managers… and your team members?
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They cost an organization of 10,000 people as much as $2.4 to 35 million a year in lost working hours. (Gallup) Worse, the classic scoring systems breed a toxic working culture where employees end up competing with their peers instead of collaborating for the good of the team.
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Another issue: scoring systems require a huge amount of input and thought. Managers waste time that could be better spent fostering future growth.
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Solution 1: streamline the process and keep it focused on company values
One US-based company got rid of its old performance review system and replaced it with three fundamental questions:
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• Are all mandatory trainings/licenses up-to date?
• Does the team member consistently complete all job duties?
• Does the team member’s performance show commitment to organizational values? (Advisory)
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Another company, Virtual Health System, created an annual review in the form of a one-page questionnaire asking for employee strengths and development opportunities.
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It’s absolutely possible to simplify and clarify annual performance reviews.
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We suggest a short interview structure (ideally no more than 10 questions), that leaves room for discussion of long term issues (because it’s done on an annual basis), and will therefore often focus on company values.
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And another benefit of aligning your reviews with fundamental company values is that feedback focuses on your company’s core issues and common cause.
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Problem 2:
The slow pace of annual performance reviews is the opposite of reactive. Once a year, your team looks back on issues that happened one, two, perhaps 12 months ago, when employees may barely remember the problem and it’s too late to improve! That lack of reactivity is a source of frustration and a drain on employee morale. Not to mention that it slows down performance.
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Solution 2: use frequent check-ins and feedback in real time
Check-ins are interviews that you hold on a more frequent basis. They’re a reactive solution to meet team needs and stay on top of the fast pace of business.
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In fact, most employees say they want feedback at least once a month.
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Reactivity is “particularly important in startups and tech companies that can change very fast,” notes content strategist and writer , who has worked both as an employee and freelancer in the tech environment.
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Companies at all stages of growth can benefit from more reactive feedback. Microsoft turned around its fortunes in the 2010s when it overhauled its company culture, ditching its “rank-and-yank” performance review program and using “connects” to give employees real-time feedback, helping them learn, grow and improve throughout the year.
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At Zest, as well as in big businesses like Decathlon and EDF, check-ins are held alongside longer term reviews (annual or quarterly). These more frequent meetings help structure the managerial relationship and meet the needs of employees and business development.
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Problem 3: annual reviews are bad for employee development
Management is a skilled profession, and giving feedback is a crucial management skill. When feedback is overly negative, employees may be left feeling intimidated, resentful and confused — not the best atmosphere in which to flourish and innovate.
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Adobe HR leader Donna Moris found that managers were actually uncertain of how to give positive feedback unless they role-played it beforehand. (Gallup)
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When managers have just one annual opportunity to give feedback to their employees, it certainly doesn’t help them accomplish this difficult task! On top of which, the slow pace of feedback makes it much less useful to employees.
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Solution 3:
Bad feedback hurts employees’ moral, but good feedback helps them grow. Managers can emulate the role of coaches: they motivate their teams, understand and see their employees, helping them build on their strengths and overcome what’s holding them back.
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Coaching psychologist Lauretta Cundy, whose doctoral research looks at the boundaries between coaching and therapy, notes that managers and employees both benefit from sparking open conversations.
Coaching conversations are not led. It’s about the individual’s performance, but the questions are framed in a way that they’re open and they’re curious. The individual who’s answering them comes up with the strategy and solution to enhance performance rather than the manager dictating how.
Cundy underlines the importance of the growth mindset:
A growth mindset does not see failure as negative. It sees failure as an opportunity to learn, adapt and do it better. If there’s a culture where you can’t mention or look at failure, you either hide it or you get into a fixed mindset state. It needs to be more adaptive than that.
So it’s crucial to keep manager-employee discussions positive, focus conversations on progress and facilitate concrete action for immediate improvement.
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Problem 4:
You put enormous effort into improving how you work. You use the latest tools to boost productivity, save costs, and enhance efficiency.
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When it comes to performance reviews, why be left behind, using difficult or outdated tools?
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With covid-19 and the explosion in remote working, should you give feedback remotely? Should it be written, over video, Zoom or Teams? How do you stay on course and guide your teams well, in any situation?
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Solution 4: use the right tools for today’s world
Performance evaluations work best when they’re simplified or complemented with frequent, collaborative check-ins in a coaching spirit. They have to be adaptive to the needs of remote teams. So if you haven’t updated your performance review process in years, this is the time to do it: change the structure, the frequency, make it possible to do over mobile…
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Using a tool like Zest streamlines the feedback process so it works for managers and teams. It can be done in a few hours, and adapted to different departments or sectors of your business (e.g. you might need different evaluations for your buyers and your in-store sales team).
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With good systems in place, performance reviews become a tool for growth. Paperwork is pared down to the essential, managers get more done, and thousands of innocent trees are saved. Accomplishing your annual performance reviews quickly and simply, with a clear and efficient digital experience for team members as well as managers, is the key to making performance reviews and check-ins a factor for growth.
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And with a digital process, you cut down admin to the essential… and save thousands of innocent trees from a terrible fate.
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In summary, the solution isn’t to get rid of annual performance reviews altogether, but to develop a system for frequent, comprehensive feedback, use the right digital tools and develop processes that foster development for people and business.
As Proffitt notes :
I think they need to be a place where people look back on their successes, their failures, and what they can learn from those, and look forward at how the company can help them achieve their goals. Because the employee’s success is the company’s success.
Make your performance reviews into a valuable addition to the manager’s toolbox.
