The Extinction of Annual Performance Reviews

Goodbye annual performance reviews, hello feedback

In this mini blog series we explore the value of performance reviews, the bucking trend against them and why on-going feedback and coaching is the new era of performance management.

We also have a white paper that explores the topic in further depth which you can download here.

The extinction of annual performance reviews

With research into performance reviews dating from the early 1920s, much has changed when it comes to what’s considered performance management best practice. The common complaints list is growing, as shared in the previous part of this mini blog series, and so the annual performance review is facing extinction. In this post we’re exploring the issues surrounding annual performance reviews in further depth and looking to what comes next.

A repeated problem with performance reviews is that they have become out-dated and not fit for purpose in the modern digital economy. In today’s knowledge-based economy, attempts to measure employees’ performance with ratings or rankings reduce them to a score. Today, the metrics of success have become more subjective and cannot be measured like a manual operative role, where work can be monitored with time and motion studies.

Some suggest the issue lies with the management style of objectives and goal setting. Having too many or too few goals is ineffective and, even if goal-setting did energize and motivate employees, it can lead to unhealthy behaviours and focus on the wrong things. In our digital age it is also virtually impossible to set goals for complex tasks, and emphasis collaboration makes it hard to separate work into individual contributions.

Cost has to be considered too, specifically in regards to the return on investment of executing the review process. CEB estimates that it costs $35m to conduct annual performance reviews for 10,000 employees. That’s a lot of investment in a process that both managers and employees feel negatively about, and for which return on investment is difficult to show.

Extinction Trends

Employers are questioning the value of traditional performance management, with 6% of Fortune 500 companies getting rid of rankings. Over the last few years a number of high profile organisations such as Deloitte, Facebook and Accenture have publically discarded performance appraisals, declaring them out dated. In 2013 Microsoft did get rid of a rankings system, and has instead replaced it with a process which judges employees against each other. The focus has shifted to offering real time feedback and developing performance rather than just managing it.

However, removing the annual performance system does not mean performance review is going to be extinct any time soon.

The Future

It is time to say goodbye to antiquated performance management systems. Bid farewell to the time of line managers sitting with employees on an annual basis, reviewing targets that were set twelve months earlier and painfully working their way through an unwieldy performance appraisal document. This was an ineffective method of performance review, stemming from systematising what should be day-to-day interactions between line managers and employees.

Read the next part of this mini blog series – Rescuing performance reviews

SelfStir

In recognising the importance of focussing on an individual’s growth in their job, shifting away from the annual review structure of out-dated objectives, SelfStir developed a platform accessible to people in across all levels of businesses, where they can drive their own development, be that personal or career, and get multi-rater feedback to aid their progress.