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August 3, 2015 / Molly Moseley

Ditching annual reviews? How to create something better

Last month, Accenture announced it would no longer rank employees based on annual performance reviews. Deloitte abandoned the tired yearly review at the end of the first quarter. Microsoft did it years ago.

It’s no secret that many employees and even management feel annual review practices are flawed. “The favorite definition of performance appraisals I ever found was that they are like fruitcake,” says Sharon Armstrong, author of The Essential Performance Review Handbook. “You get it once a year and no one wants it.”

What’s promising is that ditching the annual performance review seems to be the “in” thing to do among prominent companies. LinkUp has long advocated the need to rethink employee performance reviews. But if you’re going to toss out the old way of doing things, what are you putting in its place? 

Matt Poepsel, Ph.D., vice president of product management for workforce analytics firm PI Worldwide, sums things up perfectly: “Accenture and other Fortune 500 companies seem to be intent to re-engineer performance evaluations that merely ‘suck less,’ rather than directly tie them to what matters most—performance improvement. This will inevitably require a level of employee and manager support and education that too few companies make.”

The flaws in an annual review system seem pretty obvious. How can an employee be expected to improve his or her performance if management feedback occurs only once a year? What’s more, how is he supposed to glean achievable goals and concrete direction from a reviewer who may or may not (more often not) be directly involved in his daily performance?

“The problem with most performance reviews that rank people is you have to be really, really clear what is required for them to get to the next ‘ranking,’ ” says Jo Clarkson, UK operations director for The Alternative Board, an executive peer advisory board provider. “And when you tell them what they have to do, and they do it, you are obligated to give them that new ranking. The problem here is that it’s never that simple to say exactly what’s expected and then measure it objectively.”

Providing employees with feedback and guidance once a year is simply “a waste of time,” Clarkson says, and we agree. Performance evaluation and improvement need to be part of an on-going, year-long dialogue between employees and the managers who directly oversee them. And no matter how frequently or infrequently your organization does them, performance reviews need to focus on the overarching goal of continuous improvement, rather than just punishing poor performance or applauding good.

Plenty of effective alternatives are already in use by savvy employers, and the most successful ones emphasize building a better relationship between employees and supervisors.

“The happy medium is engaging with employees through regular, ongoing, two-way dialogue,” says Dominique Jones, vice president of human resources for Halogen Software. “By simply listening to what employees have to say, managers can provide meaningful feedback that will not only help employees in their current role, but also help achieve career aspirations. Feedback should also focus on the employee’s strengths more than correcting faults. By spending more time telling employees what they did or do well, it makes it easier to identify and replicate the conditions that support high performance.”

If your current performance management system isn’t resulting in definable performance improvement, it’s time to reassess and consider updating your processes.

“Just because performance reviews have become so ingrained in many corporate cultures doesn’t make them acceptable when considering the cost and ill will that often accompany them,” Poepsel says. Instead, companies should “design a performance improvement program from the bottom up, starting first with the employees. What do they need most to succeed? Once those needs and desires are understood, move up a level to the Managers. What are their needs and preferences in terms of participation and follow-through? It’s important that the loudest voices in the program-design effort are those who will play the largest role in its success or failure.”

So let’s embrace change and do something about it. Technology has made it easier than ever for managers and employees to communicate effectively and constantly about everything, including how an employee can improve his or her performance throughout the year.