The twilight of performance reviews?
Houston, we have a problem!
We have a serious problem with the performance reviews. In many companies, the evaluation process resembles ritual kabuki theater. In kabuki, formalism is very important. It is a symbolic, abstract theatre moving away from rationality.
In the performance review, the manager and the employee play their formal roles and then go back to their jobs. Of course, this is an exaggerated picture, but we feel that something is wrong with the process:
- The manager sitting down for the assessment after a year does not give specific feedback. Perhaps he/she refers to the events of the last month (he/she uses a short memory), which may be harmful to the employee;
- The rear-view mirror effect – we spend too much time evaluating the past, not enough focusing on the future (because, after all, conversations are not just a retrospective, they are ultimately meant to influence an employee’s future behaviour);
- Reactivity – performance reviews are conducted when it is too late to correct the course;
- Numerical rating scales can have (as research shows) a devastating effect on employees. Studies of employee evaluations have found that employees who receive lower grades often feel discouraged and demotivated, which can lead to a decline in their performance and engagement at work. Numerical scales in employee evaluations can lead to narrowing horizons and a lack of creativity in employees as they focus on meeting appraisal requirements;
- Obsolescence of objectives – goals set at the beginning of the year may no longer have practical relevance in a few months’ time. The pandemic showed us how outdated and unrealistic the plans defined at the time before were. And if objectives are linked to a bonus system and do not change, this situation has a negative impact on staff morale.
How to deal with the above limitations? More and more companies are changing their rating systems and moving away from formalisms (m.in. Deloitte, Adobe, Accenture, GE). Among the reasons for moving away from annual performance review in these organizations are:
- The cost of time spent on the evaluation process – HR, managers and employees spend too much time on this procedure, and the results are mediocre;
- ROI – internal research has shown that annual evaluations did not have a sufficiently positive impact on employee performance;
- Employee morale – annual appraisals lowered it in many ways.
So what instead?
If a conversation once a year or half a year does not bring the desired results, it seems logical to introduce a continuous conversation – the employee gets feedback on time and we avoid a stressful event (which is a formal annual performance review), consuming a lot of energy on both sides. A number of companies introduce regular, often weekly meetings called check-ins or touch-points. The 2001 Agile Manifesto talks about prioritising reacting to change over following a plan. Companies need agility, especially in redefining priorities and goals. And that’s what frequent check-ins are for.
Not all organisations can and want to get rid of annual evaluations (some have collective agreements that include the performance review process). Annual evaluations can then be used to summarize long-term goals (with the possibility of changing them during the year if the situation so requires), but it is necessary to supplement them with regular frequent supervisor-subordinate conversations. Perhaps, over time, organizations will replace annual reviews with continuous conversation. On the one hand, employees need the opportunity to inform their supervisor about their activities and achievements, and on the other hand, to get feedback on whether they have chosen the right course. The supervisor, in turn, should be able to give this feedback easily.
In SAP SuccessFactors, the above expectations are supported by Continuous Performance & Continuous Feedback solutions. It is here that the supervisor has an insight into information about employees’ achievements (updated by subordinates) and can provide feedback on an ongoing basis. Here, you also record important information summarizing check-in meetings,including discussed issues, coaching tips like “one thing you did well” and “one thing you need to improve upon”.
Continuous Performance/Feedback is a bridge between successive employee evaluations. If the company is not yet ready to abandon formal assessments, it should at least reinforce them with a continuous supervisor-subordinate conversation to ensure the speed and quality of feedback and guarantee continuity of communication.