Over the past few years major U.S. employers, including GE, Netflix and Adobe, have left behind the traditional way of conducting an annual performance review. A recent survey by management research firm CEB found that 6% of Fortune 500 companies have jettisoned ranking-based assessment systems. Even among those in the same survey that still use these systems, the overwhelming majority expressed skepticism that traditional reviews provide accurate information.
Not only do critics say such reviews are not accurate, but UCLA business school professor Samuel A. Culbert believes these reviews can set organizations back. Here’s why.
Traditional annual reviews may:
- Lack objectivity, because all supervisors and employees have subjective assessments of performance,
- Strain the supervisor-employee relationship by casting the supervisor as the primary judge of employee performance,
- Wrongly remove some responsibility for the employee’s performance from the supervisor,
- Force employees to be less than completely honest in performing their self-appraisal for fear of self-incrimination, and
- Discourage employees from being frank about their own concerns about how their supervisors themselves perform.
“Reviews impede personal growth, because what employee wants to admit weakness when that admission can be used against him or her at annual review time?” Professor Culbert asks. He maintains that traditional review systems imply that the employee is the only person to be held accountable for performance, when in fact supervisors sometimes play a role in an employee’s performance level (good or bad).
Also, the entire process of performing annual reviews can be extremely time-consuming. A CEB survey found that supervisors spend an average of 210 hours a year in performance management activities, and employees spend an average of 40 hours fulfilling their duties under the traditional system.
What’s the alternative? Culbert and others believe more frequent and informal checking-in sessions work best because, among other reasons, they allow for timely resolution of performance problems. In the standard annual performance review cycle, the thrust is retrospective, focusing on what has already happened.
In contrast, what Culbert calls “performance previewing” allows for fixing communication or resource issues that lead to disappointing performance while there is still time to turn the situation around. These sessions can take place whenever the supervisor or supervisee perceives a problem.
When either party can call for a meeting to discuss the issue, the power dynamics are changed. When employees are empowered to call attention to perceived impediments to their success, two things happen. First, they can no longer blame their problems on poor supervision. Second, supervisors develop an increasing perspective of joint responsibility for employee performance.
This doesn’t mean, however, that employees can offload responsibility for not holding up their own end of the bargain. If they sense they are falling short of expectations but fail to initiate a discussion with their supervisor, they can be seen as the “guilty” party.
Some general tips on employee feedback that are applicable regardless of the frequency and degree of formality of the review include the following:
- Focus on aspects of performance that the employee can change instead of those that are probably personality-based,
- Avoid numeric rating systems that imply a level of objectivity and precision that isn’t realistic. Instead,
- Discuss specific employee accomplishments or activities that can be used to illustrate a performance, focusing more on the positive than the negative, because positive feedback is generally far more motivational than criticism.
- Praise employees whose positive attitudes contribute to team performance and cohesion, when appropriate, and,
- Avoid comparisons to other employees.
Throughout it all, employees must always have a clear idea of what is expected of them, both in the narrow sense of accomplishing immediate priorities, and in the larger scheme of things.
When presented with the idea of abandoning traditional annual performance appraisals, some employers wonder how they will determine appropriate raises without using a numeric rating system. Proponents of the alternative approach, which is subjective, point out that numeric performance systems that rely on numeric ratings are also subjective. Therefore, determining a compensation adjustment based on the more informal and frequent check-in system isn’t much different.
The questions that need to be asked to make a compensation decision include:
- How well is the employee performing against clearly stated objectives?
- How well is the employee paid relative to other employees making similarly valuable contributions to the organization?
- What would we need to pay to replace this person, either by an internal transfer or a new hire? And,
- What is the likelihood this employee would seek a position at another company based on his or her apparent current satisfaction level and prospects for earning more elsewhere?
Another concern sometimes raised about eschewing the standard annual review is whether it would be difficult to terminate a poorly performing employee without first building up a paper trail of negative reviews. However, nothing under the informal review approach precludes adopting a formal written performance improvement plan to accumulate essential documentation, as a way to deal with persistent problems.
Should you change how you review employees now? Only you can decide by setting aside tradition and giving your current system a fresh, objective “performance review.”