Ditching the Annual Review

THE ANNUAL PERFORMANCE REVIEW WAS ONCE THE DARLING OF THE HR WORLD.

It was designed to document past performance, justify employment actions and salary decisions, and motivate employees to excel – all of which continue to be essential elements of employee management.

Sadly, in most companies the annual performance review struggles to live up to its potential. It’s viewed as onerous and unimportant. Managers and employees alike dread the entire experience.

While the goals of the annual performance review remain important, it’s clearly (past) time to look at the process with fresh eyes and try something different.

Considering a New Approach

According to a survey conducted by Fast Company, 62% of millennials – the largest group in the workforce today – have felt “blindsided” by a performance review.  74% said they generally feel “in the dark” about their performance during the year.   This is hardly a glowing endorsement of the once-a-year process.

It’s important, when looking at any method of reviewing performance, to consider:

• Intent
• Relevance
• Effectiveness

Intent – is the intent simply to check a box so there is something on record when performance starts to go downhill or to be able to assign employees a numerical rating as a way to come up with raise and bonus amounts. If it is actually to talk about performance, is a once a year conversation really satisfying that requirement?

Relevance – A manager giving feedback about an assignment that occurred in January while he or she is sitting with an employee in November isn’t exactly timely. Employees generally don’t want to hear how they did six, eight, 10 months ago.  Chances are, they already know or figure if there were issues, they should have been discussed at the time. What they DO want to know is how they are doing now and what lies ahead.

Effectiveness – Does the review process you are using currently inspire or motivate your employees? Is tying so-so performance to a 1.5% raise getting the results your company is hoping for?

Some interesting options to consider if you are looking at ditching the annual review:

• Micro Reviews: For companies that have a hard time breaking the annual review habit, micro reviews may be the way to go. The process is shorter and happens more frequently, say on a quarterly basis. The recommended focus, however, should be on development, progress, and accomplishments rather than shortcomings, because shortcomings are addressed as soon as they become apparent.
• Ongoing Feedback: For companies ready to do away with reviews all together, weekly, bi-weekly, or monthly one-to-one meetings between managers and their employees with a set agenda could work quite well. During these one-to-ones:
  • Progress toward annual development goals can be gauged
  • Challenges can be discussed – are additional resources needed? Is additional training needed or desired?

Notes should be taken to ensure continuity, especially regarding any issues that come up along with a plan to follow up.  Documentation of these conversations will be key if performance starts to fall and can be used in creating a performance improvement plan if necessary.

• Annual Reflection/Annual Development Plan – assuming feedback has been given all along, an “Annual Reflection” may wrap up the anniversary year nicely. This can be a more formal document about what the employee feels have been his or her accomplishments, general work challenges and development needs or wishes not already on their Development Plan.  Additionally, this is when a manager will revise and update the employee’s Development Plan for the new year, ensuring that any new goals align with the strategic and growth plans for the business.

Revisiting the development plan on a more informal basis periodically throughout the year may be a helpful process to see if any goals need to be tweaked, reset or are no longer appropriate.

Breaking the Link Between Annual Reviews and Compensation Reviews

Doesn’t compensation have to be tied to annual reviews? Not necessarily.  In fact, tying it too closely to the review process may have the opposite effect than what was intended. According to a study conducted by Willis Towers Watson, only 20% of North American employers believe that “pay for performance” actually improves performance. Reducing a year of accomplishments to a numerical rating that essentially assigns a percentage for a raise or bonus may override what the employee hopes to hear regarding feedback – what their progress has been and what the next steps are for their careers.

Compensation discussions separate from performance discussions may be more meaningful as feedback is already being provided and the focus can be on the pay package.

Managing the Roll Out

So, are you convinced? Are you read to ditch the annual review? Great! Here are some ideas on how to get started.

In most cases, eliminating the annual review will be met with equal parts celebration and resistance. Change – even welcome change – can be difficult for an organization and its employees. The best way to get everyone on board is to prepare at a solid plan for rolling out the program that will replace it.

Whether your goal is to downshift to a micro review/annual reflection process or eliminate the annual process completely, you’ll need to:

• Sell it to the C-suite; get their buy-in and active support by tying the new process to strategic business goals
• Purchase or create the tools necessary to support the new process
• Over-communicate the details to managers and employees, including:
  • Why are we doing this?
  • What material changes to the process will they see?
  • How will this directly impact them?
• Training, training, and more training
• Measure results and praise successes
• Be open to making tweaks along the way

As the typical workplace becomes less formal, it makes sense that this informality will be reflected in its business systems, including performance evaluations. Just remember that informality is not an excuse for a lack of feedback or carelessness with the process. Employees need and deserve to know how they are performing, and the goal with any process improvement is to provide them with more feedback, not less.

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