Are performance reviews going the way of the dodo?


We can talk all the live long day at a conceptual level about how to ignite employee performance – in fact, I love doing this! But day to day, leaders, managers, and HR executives need to translate concepts into strategy, and strategy into tactics to formulate plans and procedures for managing these ambiguous organizational inputs called humans. We need some way to measure and monitor performance so that we can reward strong performance and intervene when there is poor performance.

For the past several decades, an annual performance review was The Thing That was Done. This formal review process is traditionally a one-on-one meeting between manager and employee to discuss the prior year’s goals and objectives and where performance fell relative to those objectives. This review is also usually tied to compensation decisions such as raises and bonuses. More often than not, this process is seen as “owned” by HR, not the individual manager, and certainly not the individual contributor. If a quick review of the blogosphere is any indication (e.g., see Forbes, CBS News, Wall Street Journal, WSJ again), however, the pendulum is beginning to swing away from this practice.

The problem with the formal performance review is that by its very design it tends to undermine engagement, ownership, and motivation – those intangibles that can help organizations reap the very best their people have to offer. It creates unnecessary tension between employee and manager by pitting one against the other and creating a power differential that disrupts collaborative goal setting and problem solving. The fact that it is tied to compensation, raises, and promotions makes people focus solely on garnering positive review versus being open to the critical feedback they actually need in order to improve. And in reality, an enormous proportion of compensation outcomes is driven by factors outside of individual control anyway (business performance overall, market forces). Further, organizations are often not tidy little org charts with a one-to-one manager and employee ratio – it is not uncommon for an individual to have multiple reporting relationships, which confuses the issue of who should be doing the evaluating (not to mention how well the evaluator even knows the person being assessed). And, sadly, more often than not, the evaluations themselves are not even necessarily accurate. In fact, according to a survey conduced by Modern Survey this past spring, only 46% of respondents agree that performance evaluations are an accurate assessment of performance. I think that the final nail in the coffin, however, is that theses reviews occur once a year. If feedback is going to be remotely effective, it needs to occur as close as possible to the behavioral occurrence – not at the end of the year. Ill-timed feedback has little chance of shaping future performance.

Proponents argue that we need the annual review because it ensures managers are providing feedback and performance management, that we need a method for documenting performance problems, or that simply because people have come to expect it. I would argue that while those facts may be true, we need a better process.  At best, the traditional performance review merely summarizes performance, and there are other, less damaging ways to provide feedback and document problems. The fact of the matter is that in this day and age, businesses need a process that is faster and more flexible. Younger generations of employees demand more frequent feedback, and the speed of change in the business environment requires it. Businesses that aspire to be agile need to be streaming communications, including performance feedback, to their employees in an ongoing fashion. Creating a feedback-rich environment requires strong managers and management systems that provide a way to document measurable performance variables, including objectives, skills, values, and behavior. True performance management requires collaborative goal setting, continuous communication, a culture that promotes feedback as a way of life – not a year-end activity.

“Feedback is the breakfast of champions” –Ken Blanchard