Most organisations continue to use annual performance reviews, despite their flaws. Nick Gallimore explains why frequent ‘snapshots’ may provide a more accurate picture of employee performance and keep staff engaged with the process.
Annual assessments can be “wildly inaccurate”, even “soul-crushing”, quoted a BBC article in 2019. For many, the term “performance management” is associated with the dreaded annual performance appraisal. Many cringe at the term, which isn’t surprising.
Annual performance reviews or appraisals have many flaws and yet so many companies use them – a 2018 survey by World at Work found that 80% of companies still used formal performance reviews.
They exist because many companies need the outcomes of the performance review process, although they’d prefer to get these outcomes by a better method.
Traditional performance reviews had four major weaknesses:
- They were bureaucratic and time-consuming and therefore unpopular with managers and employees alike.
- Employees disliked the tick-box exercise of receiving a performance rating, which distilled a year’s worth of work into a single label or number.
- There was an issue with recency bias whereby an employee’s recent achievements (or failures) skewed the judgement of their manager. This lured savvy employees to ‘gamify’ the process which further distorted the results and led to ineffective and unfair outcomes.
- Evidence has shown performance ratings have no relation to organisational performance. This was evidenced in a NeuroLeadership Institute report which gathered more than 23,000 employee ratings from 40 companies and found no sign that ratings had any effect on profits or losses, reaching the damning conclusion that “performance ratings have no relation to organisational performance whatsoever”.
Given these significant flaws, why have performance reviews continued to survive in 80% of companies? Performance reviews are hard for organisations to dump because they fulfil two key purposes: they provide the forum for a dedicated discussion about an individual’s performance and development, and they enable employee performance to be measured and assessed. So, though they may be flawed, they are better than nothing.
Many organisations can solve this conundrum by adopting a continuous performance management approach. Data can be gathered from the interactions staff have had with their manager over the last 12 months, including check-in conversations, goals, and real-time feedback.
Adopting a continuous approach means that managers and employees have check-in discussions frequently throughout the year, providing a regular forum for discussion about an individual’s performance and development. At the end of the year they can use the data gathered from these discussions to complete a targeted performance snapshot. This poses a small number of specific questions to identify key employee metrics around performance, top talent, promotion readiness or succession planning.
Adopting a continuous approach means that managers and employees have check-in discussions frequently throughout the year, providing a regular forum for discussion about an individual’s performance and development.”
Employee performance can be measured and assessed based on information served up by technology. This means that organisations can make fair, fact-based decisions on staff ratings.
The outcome is a simpler, more engaging process which drives high performance and engagement from the employee, while delivering credible, measurable metrics based on evidence built up through regular check-ins.
Most staff would be happy with this new system, as it is easy to understand and should give a fairer picture of their performance. Employers must communicate any changes to performance management structures as early as possible and explain why they are making the changes.