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No More Annual Performance Reviews?

Is the annual performance review over?
Is the annual performance review over?

The yearly performance review has long been hated by employees and managers alike. The idea of being graded on performance creates an atmosphere of fear and competition that has no direct value to increased productivity or influencing the behaviors that should be rewarded in the organization. More time instead is spent on the wrong questions: Who will get the biggest raise from the available funds? Who will be first on the chopping block in the next round of “rightsizing”? What old mistakes will be dredged up and used as ammunition? Will stellar performance even be remembered six months down the line?

Dissatisfaction with Performance Reviews Is on the Rise

Fortunately, employers are figuring out that assessing workers once a year is an inadequate and painful way to measure or manage performance. In fact, a 2010 survey conducted by management consultant Chuck Bolton found that about 9 out of 10 employees and executives find performance reviews to be ineffective.

According to a study titled “Performance appraisal satisfaction: The role of feedback and goal orientation” published in the Journal of Personnel Psychology in 2013, no one likes getting negative feedback at work. This holds true regardless of whether employees are motivated by a desire to prove their abilities, to avoid failure, or to learn new things. Being brought into the manager’s office for a round of criticism, no matter how constructive, simply isn’t boosting performance.

Do Companies Really Need These Yearly Reviews?

In an annual review, the performance being evaluated is usually ancient history and time that could have been spent actively supporting desired changes has been wasted. Reviews that grade employees on a curve, ensuring that some workers will be labeled “poor performers” regardless of actual effort, are particularly noxious. They pit workers against one another to stay out of the bottom tier rather than encouraging team members to bring out the best in each other.

Employers often use reviews to document unsatisfactory performance or standardize assessments to avoid the appearance of discrimination in terminations or promotions. However, there are other tools that can serve these purposes, leaving companies the option to make new choices for performance management.

Alternatives to Performance Reviews

  • Try performance previews that focus on the future rather than on the past, with an emphasis on what the manager and employee need from one another in order to reach the next level of success.
  • Use performance coaching with short, frequent, informal one-on-one sessions to talk out issues and find new ways to boost performance.
  • Consider crowd-sourced employee incentives. Give each worker an equal quantity of “reward tokens” to distribute to their peers (anonymously) based on performance over a six month period. These tokens can then be redeemed in the form of a cash bonus.
  • Use an iterative, “Agile” review system, choosing one measurable activity at a time for employees to improve.
  • Implement ongoing reviews in real-time, including 360 reviews and self-assessments to spot opportunities for positive reinforcement as they occur instead of months later.

The shift to a new performance enhancement model needs to take place in stages. The annual performance review has become so ingrained in organizational culture that many believe only the small and nimble companies can succeed without it. The notion that the democratization of performance is simplified in a graded and ranked system is completely barren in the social and collaborative world we live in. That said – where to begin? Start at the top and work down. Managers should undergo the process themselves before they implement it for their own direct reports. Place an emphasis on using a method that is fair, transparent, and (above all) supportive. Survey and pulse feedback with new methods and refine as needed. Most likely the data needed to render a performance review will be just as obtainable but far more valuable.

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