Is it time to abolish the annual performance appraisal?

Peas in a Pod Consulting HR Service Hampshire



There is growing opinion in the business world, amongst managers and employees alike, that suggests annual performance review systems are unfit for purpose, demoralising and serve little qualitative purpose.

Many modern day managers believe the process is a time consuming and counter-productive paperwork formality. Assessment metrics used in appraisals are often so soft that any conduct or efforts on the part of any employee can be open to interpretation, or manipulated to reach a pre-decided outcome by the appraising manager.

Furthermore, their value also exclusively depends on the competency of the manager using the process to benchmark employee performance, as well as the value the manager themselves place on the process. And even when these are satisfied, a lack consistency between employee outcomes, where multiple appraising managers are using the same system but with different approaches, opinions and natural biases, can still serve to undermine the whole system.

Ultimately the problem lies in the fact that if the system doesn’t work then it feels contrived, employees know it’s contrived, and so it has little value or meaning.

And what then of ‘performance related pay’ appraisal systems? A transparent fair tool to financially reward exceptional performance or a quantifiable paperwork exercise where employees lose sense of “why” they are doing their job? If the number of customers served becomes more important than serving them well, who wins? The employee apparently-if they hit their numbers. Not that inspiring if a mission of the company is to deliver exceptional customer service.

And herein lies the essence of the issue. Performance appraisals are often dominated by a ‘carrot and stick’ mentality more than positive psychology and therefore it’s ability to inspire or engage is therefore significantly limited.
So scrap the process altogether, or adapt it to reflect the significant changes in business practices over recent decades?

In recent years a number of international companies have scrapped traditional annual performance reviews altogether. Microsoft stopped it’s performance ratings and review process after employee feedback suggested it was driving the wrong type of behaviour; “It was having a negative impact on collaboration, risk-taking and innovation” and was creating ” division and dissatisfaction” amongst employees

It instead now operates a light touch review system that acknowledges and rewards collaboration over competency. This involves regular ‘connects’ throughout the year with staff, driving a more agile and organic performance review system that focusses exclusively on the contributory impact of the individual’s work on the business, their customers and their team.

Other companies are favouring an employee-driven performance review system where enablement, quality of discussions and personal self-assessment are the focus. In such models exceptional performance is identified and agreed through a consensus process by a group of the organisation’s leaders. These companies assert that such an approach shifts ownership of professional development to the employee, therefore increasing productivity, competency and employee satisfaction.

Increasingly, organisations are recognising the need for a social model of performance management- essentially combining traditional annual reviews with a ‘crowdsourced’ 360* style feedback process; where multiple peer opinions are gathered and provided ‘in the moment’ to achieve greater insight, impact and self awareness.
This need for employees to be recognised for their work constantly and immediately by multiple sources, as is now prevalent in our social lives, is expected to be the future of performance management in the workplace.

We suggest that when performance management is done correctly, it is absolutely fit for purpose. What “correctly” looks like and what format will differ between organisations, but some fundamental principles exist. When you have created a culture that enables employees to really understand how their role links back to the strategy of the company, and to objectively self-assess their contribution in terms of value and actual impact, then you’re on the right track.

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