The death of the annual performance review

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In September 2016 Accenture scrapped its once-a-year staff evaluation process and disbanded its employee ranking system.

Its new approach for its 330,000+ global workforce is to provide feedback on an ongoing basis.

“The art of leadership is not to spend your time measuring, evaluating,” said Accenture CEO Pierre Nanterne, favouring a model that purports to allow for greater employee freedom, better alignment between strengths and tasks and a more simplified performance measurement process.

Accenture are by far not the only company questioning their staff evaluation processes. A 2014 Deloitte survey found that 58% of HR executives believed their performance process does not drive employee engagement or high performance, and neither was it an effective use of anyone’s time. In the same survey only 8% of companies said their performance process lead to high levels of value.

Josh Bersin, founder of Bersin by Deloitte (Deloitte’s HR global advisory arm), estimates that around 70% of multinational companies are moving in the direction of an ongoing feedback model.

This is all fairly scathing of a practice that has been an HR cornerstone for decades. Then why now are annual reviews coming under fire and losing favour to alternative strategies, spearheaded by ongoing feedback?

Annual reviews are heavily backwards looking, greatly emphasising financial rewards and punishments, often at the expense of improving current performance and encouraging talent.

Conversely, regular conversations around performance and development shift the focus to developing a workforce to be competitive both today and years from now.

“I think that leaders are starting to understand and internalise that honest direct timely conversations about performance are better than ‘HR driven’ annual meetings,” says Dan Cable, professor of organisational behaviour at London Business School.

“Maybe performance management was once seen as a ‘nice to have, for HR to have records’ when the world was not changing too much and you could assume the job and the behaviours didn’t change much. Now that people need to adapt and change so often to help the organisation compete, perhaps it has become a business necessity.”

Additionally, as well as being more agile and responsive to change, ongoing feedback is a better fit for millennials and Gen Y, who are at the forefront of disruptive change, growing up and becoming leaders in an environment that is increasingly performance/results-driven, always-on with greater access to real-time information, and where entrepreneurialism is a generational trait. To innovate and develop solutions, they require constant learning and training, supported by ongoing feedback.

Focus on strengths, not fixes

“I’ve been helping leaders focus on understand and highlighting employees’ strengths, rather than focusing on what limitations employees need to ‘fix’,” says Cable. None of us are perfect, of course, but if we’re trying to improve people and get more out of them, it is more motivational to talk with people about what they love and what they are best at.

“Also, using this strengths-approach, leaders can try to find ways for employees to play to their strengths more often. This creates more energy and motivation, but also can lead to innovation and creativity, which organisations are starving for.”

But all this can sound like a headache from an HR or management point of view. More work, more engagement, more report writing. Yet, implemented well this should not be the case. Ongoing feedback can be simplified, with less documentation compared with preparing and reporting annual reviews. Annual feedback can often be overlooked for these very reasons, denting employee engagement in the process.

“Many organisations with annual performance evaluations simply do not do them,” says Daniel A Feerst, an HR consultant with close to 40 years’ experience and founder of DFA Publishing and Consulting.

“Ongoing performance evaluations are both easier and less stressful for managers and employees because they require less attention and in-depth discussion and planning, the bulk of which takes place at the beginning of the year. The burden, anxiety and lack of ongoing structure associated with annual reviews become points of avoidance for supervisors, with enormous procrastination leading to job dissatisfaction and risk for the organisation.”

While debate will continue, it may be that ongoing feedback is a ‘no brainer’ and annual reviews will soon be a thing of the past.

“This obviously seems like a better approach; in fact, it seems like the only way to cope with a rapidly changing world,” says Cable.

Neil Johnson is a freelance business journalist who contributes regularly to trade publications and member organisations, covering employability, recruitment, business trends and industrial analysis.

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