“I’m a four.”
“I got a three, but she got a five. It was her turn this year, I guess.”
How many times have you overheard this type of conversation in the hallways of your organization following performance reviews?
In fact, no one seems happy about the process.
Studies find performance reviews to be the second-most disliked activity by managers, just behind firing employees. And employers dislike the process, too, with 86 percent unhappy with their own performance management.
Even more revealing? Only eight percent of human resources executives think their performance management systems are making a significant contribution to employee performance.
As a result, it’s no surprise that more and more companies are abandoning traditional performance management processes. This includes some big players including Accenture, GE, Microsoft, Adobe, and Deloitte. And they’re doing it very publicly, not in the shadows.
Instead of rankings and ratings, they’re turning to less formal and more frequent performance discussions.
What’s wrong with traditional performance management?
The reason for this shift isn’t necessarily because traditional performance management is broken. It’s because the purpose behind it has changed.
It wasn’t very long ago when employers used the annual performance review process to simply assess an employee’s past performance. This historical review worked when there was no desire to actively manage—and develop—employees.
Today, organizations need ongoing professional development to ensure their employees have the knowledge, skills, and experience they need to be effective. This means the performance review process is changing. It is focusing less on past performance and more on future growth and development.
The process is also changing to reflect the modern world of work.
Employees, and the millennial generation in particular, want continuous learning and professional development, and they expect a performance review process that is timely, fair, and transparent.
Forward-thinking human resource executives recognize the changing face of performance management.
They’re putting processes in place to encourage managers to talk with employees about their development and performance more than once a year.
This discussion approach also works in lockstep with more meaningful goal cycles—as short as a month or even a week.
It accounts for the fact that organizations are working in teams and collaborating. Rankings and ratings don’t have a place in these work environments, because they encourage competition and discourage collaboration among team members.
But it’s not all about the employee and performance. Traditional performance management models are expensive and cumbersome. It doesn’t have much equitable return.
For example, when management consulting firm Deloitte reassessed its performance management approach, it found performance reviews took an average of 28 hours per employee.
Leave Traditions Behind
Research finds that about 70 percent of organizations are reconsidering their performance management strategies to look forward, not backward.
There are three ways companies are revamping performance reviews:
- Eliminate the annual performance review altogether in favor of more regular, real-time feedback.
Retail giant The Gap replaced their annual performance reviews with monthly coaching sessions between employees and managers.
GE has taken advantage of technology by using a performance tracking mobile app that allows employees to make text or audio notes during discussions.
- Remove rating systems that cause competition among employees.
Research firm CEB found that six percent of Fortune 500 organizations had already eliminated rankings, because they believe they lower performance, increase attrition, and have a negative effect on stock prices. Instead, more employers are assessing employees based on their personal objectives, not against their peers. Others are using more multi-rated feedback methods, such as peer feedback, to improve communication and collaboration.
- Revamp compensation systems to more personally reward employees.
Some organizations are moving to bi-annual bonuses and peer-to-peer rewards. Coworkers at Google, for example, can give $100 rewards to peers for jobs well done.
Each of these new ways of performance management share similar characteristics that are:
- Continuous, not static
- More conversation-based and less rankings-based
- Focused on development rather than correcting flaws
Evaluate Where You Are
Leaders will always need information on employee performance and employees will always desire feedback. Companies are seeking an easy and effective way to do that within the model of a flexible system.
And while there’s no single solution for every organization’s performance process, most organizations would benefit from thoughtfully revisiting their performance management goals.
The solution may be as simple as small, more frequent performance conversations in a feedback-oriented business environment.
As organizations evolve their performance review process, it will be interesting to see how the “conversations” in the hallways begin too evolve, too.