Are Performance Reviews Dead?
The dreaded performance review. Where a manager tells you what you did wrong eight months ago. Not really helpful.
While what gets measured gets managed, as Peter Drucker famously said, that isn’t always the case when it comes to the traditional model of the performance review.
Performance reviews first emerged at the dawn of the twentieth century. They were useful in an economy that measured factory “outputs” but now, in an increasingly knowledge-based economy, they are not effective at capturing success in innovation, teamwork or customer empathy.
They also take up a lot of management time and create a lot of unnecessary angst among employees. Maybe that’s why pop culture has so much sport with the idea.
Robyn Tingley, who has held senior roles leading HR divisions in Europe, North America and Latin America, says the performance review is “focused on the past, not the future. It doesn’t reflect the fact that people don’t set annual goals anymore, as much as they set quarterly or monthly goals, and conversations need to happen around those – not just at year end.”
So maybe it’s no surprise that things are starting to change. Accenture, the global consulting company with over 300,000 employees, recently dropped performance reviews, following other big names like Microsoft, Adobe and Gap. According to the management research firm CEB, about six per cent of Fortune 500 companies have stopped doing the “forced ranking” element of performance reviews.
Deloitte, another consulting powerhouse which has offices in Saint John, Moncton and Fredericton, is replacing what it calls “rank and yank” performance reviews with coaching and development. In a widely noted report, Deloitte says that, “Leading organizations are scrapping the annual evaluation cycle and replacing it with ongoing feedback and coaching designed to promote continuous employee development.”
Tingley, who recently returned home to New Brunswick to launch GlassSKY, an organization focused on workplace diversity, agrees that things are changing. “The biggest and most important trend I see is that performance discussions are evolving to become development discussions. These are constructive, future-focused conversations that assess the skills, experiences, and projects the employee needs to obtain to advance within the organization and make a stronger contribution,” she said.
The rise of the millennial generation is another force changing HR practices. PwC says that millennials will account for 50 per cent of the global workforce within four years. They have different expectations about work and life than the generations that preceded them. In the non-stop war for top talent, having a supportive HR environment can be a key competitive advantage.
“Millennials expect something different than a yearly performance review. They want constant feedback and growth. They expect it in the moment, and they expect feedback to be specific. Their goal is to learn, not to get a label that equates to a rating that feeds into a pay calculation,” said Tingley.
“It’s not about status or money. Major employers know these outdated practices are not going to suit the next generation, and that is part of the reason we’ve seen so many abandon the old system and try to invent something new. The challenge is that a system is only as good as the people who operate it, so managers are going to need to get far better at development conversations to keep millennials feeling engaged and rewarded on an ongoing basis.”