Rethinking Annual Performance Reviews

Most employees and managers look forward to annual performance reviews as much as they look forward to having a root canal. Next to getting fired, it is the most unpleasant employee experience. According to a recent survey by CEB Global, 95% of managers are dissatisfied with their performance management system and 59% of employees feel their performance reviews are not worth the time invested. Many misinterpret this kind of data as evidence that we should eliminate all performance reviews. But employees have been telling us for years that they want more feedback, not less. If we stop performance reviews, we may eliminate what little feedback employees currently receive. The issue is how often and in what way employee performance is reviewed. What employees don’t want is feedback concentrated into a year-end performance discussion and what they really don’t want is a rating attached to that discussion.

Millennials, who are now the largest segment of the workforce are asking for more feedback and they want that feedback to be almost instantaneous to when their tasks are performed. This allows them to make adjustments along the way and maximize their performance. A recent article in FastCompany points out that 62% of Millennials feel blindsided by their current performance review process.

Most managers (and people in general) are not good at delivering bad news. When feedback is concentrated at the annual performance review, the opportunity to have provided frequent timely positive or negative feedback has been lost. It is now all about summing up how the employee did for the year and then frequently labeled with a rating. For the few employees that had “Exceptional” or “Exceeded Exceptions” years, the conversation tends to go well. But for the larger part of the employee population whose overall assessment is in the range of “average” to “needs improvement”, as far as the employee is concerned, it is a bad news conversation. At this point, managers tend to do one of three things.

1. Only provide positive feedback to the employee

   This is the easy way out for the Manager. Just have a happy conversation talking about all of the things that are working well. No need to get into what should be done better. The problem, of course, is that we all have things that need improvement. By not addressing them, there is a risk of one small issue in the future will end up being the “straw that broke the camel’s back” causing a disproportionate amount of negative feedback and a healthy dose of hurt feelings.

2. Provide positive feedback, but tell the employee that due to feedback/input from someone else, she/he had an average/poor performance year.

   In HR, we call this example “Going Native”. The manager is joining forces with the employee. “Look, I think you had a fabulous year. If it were up to me, I would give you our top rating. Others (i.e., leadership, other managers…) don’t feel the same way, though.” This tactic is poisonous to a company culture. Effectively, the manager is selling out and the employee ends up in a state of confusion.

3. Provide negative feedback without excuses

   Some managers do provide solid feedback at the end of the performance year. While this alternative is much better than the two above, it still has drawbacks. By waiting until the end of the year to provide concentrated feedback, the employee has lost the opportunity to make course corrections during the year. Employees find delayed feedback frustrating. Also, presenting the employee with a laundry list of feedback is difficult for the employee to process and often leads to a conclusion of a performance level that is not actionable for the employee to improve.

Baby boomers, particularly those in leadership, often complain about Millennials’ need for almost constant feedback. Those boomers grew up just fine with annual performance reviews and little if any other performance feedback. To be fair, though, boomers grew up just fine in spite of getting so little feedback. Had they received more feedback just imagine how much easier their paths to success could have been.

So here it is. Based on my 25+ years in HR (and all of my excellent, average and needs improvement decisions) I recommend the following:

1. Managers and employees should have performance related discussions as frequently as they feel comfortable. Weekly is fine, but monthly or quarterly could work as well.
2. It is fine if employees want to initiate these conversations.
3. If your culture will permit it, annual performance ratings should be avoided. They are morale killers.
4. Getting rid of annual reviews is tricky, but some organizations such as Adobe, Accenture and GAP have eliminated or made significant changes to their annual performance reviews. If solid performance conversations are happening throughout the year, I recommend you take a hard look at modifying or eliminating annual performance reviews.