I don’t think I’ve ever met anyone who enjoyed performance reviews and the good news is there’s a much better way to do them.
Whether they occur quarterly, yearly or at the end of a contractual period most traditional performance reviews are a waste of time and energy.
Often they are a relic of management past. For many organisations performance reviews are habitual rather than useful.
Performance reviews take up hours and hours of work time. They focus too much on past performance. They almost always inspire anxiety and the performance data they collect is mostly subjective.
Managing the performance of employees should be easier, less stressful and always based on real time information.
That’s why the world’s most innovative Fortune 500 companies including companies like Adobe and Deloitte have completely redesigned their performance review processes.
Increasingly, traditional annual reviews are being abandoned in favour of more regular and informal feedback opportunities. Often this occurs through a mobile app with a shift away from evaluation and rankings to coaching and development.
While there’s no one-template performance system that works for all organisations, good appraisal systems have three basic elements – they’re simple, continuous and accountable.
An effective performance appraisal system is intuitive, easy to use and understand – in other words it’s simple.
A common criticism of many performance review processes is they are too complex. The larger the organisation, the more elaborate the process usually is, sometimes involving self-evaluations, reviews by managers, peers and clients, and reams of domains, metrics and policies.
Often, these processes are distilled into a single rating that concludes a person is “meeting expectations” or “exceeding expectations”. At best, this is a process that is clunky and perfunctory.
In 2011, Deloitte calculated that it was spending a staggering 2 million hours administering its traditional ratings based annual review process.
Adobe, which also used a ratings based annual review system said that its planning for annual reviews took 9 months out of 12. Senior Vice President of Adobe, Donna Morris joked that “It was like preparing to give birth to a child. It was like, why does this take so long? Does this really drive business return?”
Steve Jobs’ “Apple standard” can be a helpful reference point for design of a performance review system. What parts of the process are not essential? What can be expressed in a more plain English way? How can I make this process easier to use?
Often the approach will involve trial and error to get it right. The most innovative companies accept this and will trial alternatives in small sections of their organisation before rolling it out across their whole organisation. A good example of an organisation who achieved simplicity in its review process is General Electric.
In 2014, General Electric trialled the removal of its time-consuming ratings based annual performance system with a greatly simplified process of continuous feedback that can be facilitated and recorded through a mobile phone app called “PD@GE”.
The app has a simple menu bar with just four options i) priorities, ii) touch points, iii) summary and iv) insights. Simplicity in action. The purpose of the app is to facilitate continuous conversations with a view to promoting continuous improvement.
Adobe also achieved simplicity in their performance review process by replacing their annual ratings appraisal with frequent and informal ‘check ins’ where managers and employees discuss goals, feedback, expectations and ongoing development. These “check in” meetings are not scripted and not documented.
An effective performance review process is continuous. Traditional annual performance reviews are largely a waste of time because they offer too little too late.
In aviation, an airline wouldn’t wait 12 months to talk about a near miss and in healthcare 12 months to discuss a misdiagnosis and yet in other industries poor performance can go on for long periods of time without anything being said.
General Electric’s move from annual reviews to regular conversations facilitated by PD@GE app was driven by the understanding that continuous feedback is critical to business success, and is necessary to support, guide and if necessary redirect current and future work.
They also recognised that with tools like social media gaining popularity, their growing “millennial” workforce expected that if they could participate in real-time sharing of information, feedback and ideas at home, they should be able to do that at work too.
Improvements in technology present organisations with the chance to use cloud based software and apps to facilitate dynamic and continuous feedback between managers and employees. It’s exciting because it can provide automated, real-time sharing of data which may relate to, or provide a kind of measure of performance, like share prices, sales levels, or in schools, assessment data, student gains and rates of absenteeism.
Microsoft’s approach to performance reviews is an emerging model of this. A cloud based HR tool called “Connect” provides real-time analytics of company performance and individual performance and also establishes a platform for continuous conversations between managers and employees. IBM has recently introduced a similar app based system with the same functionality called “Checkpoint”.
An effective performance review process is all about accountability. It makes sure people know what they are expected to do and that they do it.
Ratings based annual review processes are often sold as a scientific and objective way to measure performance and distinguish between employees for the purpose of salary payments and bonuses.
Unfortunately, the research indicates that frequently the data generated through performance reviews is unreliable and when linked to remuneration, leads to a focus on money rather than performance.
Deloitte decided to redesign its ratings system based on compelling evidence that ratings are not a reliable measure of performance. Research by Mount, Scullin and Goff in 2000 on the “Idiosyncratic rater effect” indicates that up to 62% of variance in ratings about performance can be attributed to who is doing the rating.
Unreliability of memory, the distorted nature of our perceptions, group think and false consensus are all unconsciously brought into the performance review process. Deciding what data will be considered to measure performance and the weighting it will be given in determining ratings is an inexact science and is loaded with unwitting biases.
Deloitte now uses data from “performance snapshots” where each quarter, team leaders are asked the following four questions about their employee:
- Given what I know of this person’s performance, and if it were my money, I would award this person the highest possible compensation increase and bonus.
- Given what I know of this person’s performance, I would always want him or her on my team.
- This person is at risk for low performance.
- This person is ready for promotion today.
Based on its own research in its organisation, asking just these four standard questions of all team leaders provides more objective, targeted data about a manager’s perception of their employees’ performance.
Many industries convince themselves that performance review processes that everyone dislikes are unavoidable, but nothing could be further from the truth.
If we start with the principles of simplicity, accountability and continuous, staff performance evaluation and review can become an engaging and useful process, instead of a drain on an organisations time and creativity.
By Tony Farley, Executive Director.
Check out our website for more on Performance Reviews:
Rave Reviews: Six Top Tips to make Performance Reviews work for you.
Dashboards: Demystifying the Data – A look at how technology is helping gather real-time details on staff, and overall workplace, performance.
Performance Reviews: Who, What, Where, Why and How – An extensive look at the purpose and history of staff evaluations, what the latest research tells us, and how some of the world’s biggest companies and forging new ways of doing them.