Performance reviews (also called performance appraisals) are an essential part of career advancement and pay increases for most organizations. They’re normally conducted once a year, and occasionally they include a mid-year touch base. At the end of the review cycle, employees and their managers assess how well the employee has met the goals they set the year before. Managers then use this information to determine how much of a raise the employee will receive. It’s often also used to determine whether they should be promoted.
It’s a good premise, but rarely do these programs perform as intended.A study of 1000 professionals showed that many are unhappy with their companies’ performance review process and don’t believe the reviews appropriately reflect them and their work:
- 37 percent said they think the process is outdated;
- 42 percent said they think managers leave important elements out of their review due to bias; and
- Nearly 25% said they feared their performance review, particularly millennials.
Often, these are “set and forget” type programs. Sound familiar? Nobody remembers until they get a reminder from Human Resources. And then it’s a scramble to pull everything together to meet the deadline.
When was the last time you reviewed your performance management process? If it’s been more than a few years, you’re well overdue. Do your employees believe your review process is fair and equitable and delivers the information and guidance they want to hear? Or do they see it as more of a “boss-administered-employee-received” activity that doesn’t appropriately demonstrate how they work? Most likely, the answer is closer to the second point. If so, it’s time for a serious review and some adjustments.
What’s wrong with your performance review process?
Work is done differently today and moves at a much faster pace. For the most part, traditional annual performance reviews don’t appropriately reflect today’s work environments. Goals and projects occur in days and weeks instead of months and quarters. Teams accomplish the work together, but employees are still reviewed individually.
Managers review their employees against goals that are a year old (or longer if they’re running behind). A year later, are those goals still relevant and timely? The goals may be a year old, but performance reviews tend to be biased toward more recent work, as the work of the past few months is what’s remembered first.
Honesty is often missing from the conversation. Employees are uncomfortable discussing their performance (often underestimating or overestimating their accomplishments), and they feel their managers aren’t always truthful. Often, that feeling is correct. Some managers don’t like putting the truth in writing, because they haven’t been trained appropriately on how to have and document these difficult conversations. As a result, they sugar coat or don’t document bad performance, which can lead subpar employees to believe their performance is acceptable.
In the traditional review process, employees don’t have the changes to discuss the supervisory and leadership skills of their managers. Allowing employees to provide feedback on (or even formally evaluate) their managers drives employee power and engagement, as they feel they count and their voices are being heard and listened to.
Reviews are linked tightly to compensation. Employees believe that if they get a good review, they (should) get a strong salary increase. But A does not always lead to B. Connecting the two creates an environment of winners and losers, reinforces hierarchies, discourages honesty and can very easily become politicized. The performance review process can lead to conflict, especially when managers are working with a smaller pool of money, and they must compare employees against each other to determine raises. When one employee “wins,” another “loses.”
Even high performers suffer once they hit the top of the salary range. Their supervisors have to stop giving them raises, regardless of how well they perform, find a way to provide other compensation, or promote them. Separating employee performance discussions from raises can lead to more honest coaching about performance, improvement, professional development, and opportunities for growth.
The process takes so long. Adobe calculated that assessing their 11,000 employees took 2,000 managers 80,000 hours. So, in 2012, they completely revamped their program and eliminated much of that time while streamlining the process. Today, it’s much more fluid and focuses on coaching, performance management, and growth instead of managing to goals. There’s no set format or frequency, and managers don’t complete any forms or use technology to guide them. They also no longer document what happens during these conversations.
Your employees will tell you how they want to be reviewed, if at all
Performance-related conversations with all levels of employee will always be necessary, to ensure employees remains engaged and companies continue to grow and meet their strategic goals. So what can executives do to improve their performance processes and meet all of those needs more effectively?
Often, it’s good practice to ask employees to weigh in. They’ll let you know what they think will work best, and what makes them uncomfortable. Their feedback could drive a few small tweaks, like discussing performance throughout the year instead of just in one formal session and giving feedback on managers. Or, it could take the process in a completely new direction.
IBM did this in July 2015 when they decided to change their 10-year-old performance management system. An internal social media post on the topic garnered more than 75,000 views and over 2,000 comments. Employees were clear on a number of items that needed to change, including that one year was too long of a period for the goals on which they were being evaluated. They wanted to be able to adjust them throughout the year and get and give feedback more frequently.
IBM used what they learned to turn their performance evaluation system on its head. They did away with a number of functions, including relative performance rankings, where managers met and rated their employees against each other. The result is an internally developed app-based system, where employees set goals more frequently and managers provide feedback at least every quarter.
At the end of the year (this is the first year), IBM employees are judged across five criteria—business results, impact on client success, innovation, personal responsibility to others and skills. Managers will assess whether their employees have exceeded or achieved expectations for their role in each of those five areas or if there’s a need for improvement. With these criteria, there’s no longer a single measure of performance, which leads to a more honest, balanced, richer discussion.
In today’s digital, fast-paced environments, the employee review rules we started with are no longer appropriate. Nearly 10 percent of Fortune 500 companies have done away with annual employee performance reviews, exchanging them for systems that incorporate newer technology (or eliminate technology altogether) and immediate feedback when an employee reaches a milestone.
The framework and the specifics need to more appropriately reflect the needs of the employees as well as the organizations. Once companies take the time to revaluate and adjust their processes, their employees will become more engaged, and as a result, more productive.