How to phase out the annual performance review (and what to do instead)

Indian Business women discussing ideas.
July 21, 2020

 

This article appeared on HR Toolbox on June 24th, 2020.

The annual performance review now seems to be a worm-out and irrelevant process – especially today when employees are expected to reskill more often, be more agile about role changes, and in a pandemic when the expectations of employees and their performance as they work remotely have changed.

In 2012, Adobe dismantled its annual performance review process and replaced it with an agile, continuous system. In 2015, Accenture, Deloitte, and General Electric followed suit and chose to replace the long-drawn, time-consuming process of annual reviews with more freedom and frequency in offering feedback, and they have not looked back since.

Is it time for your organization to follow the lead?

Why now is a great time to do away with annual performance reviews

Employees are working remotely, goals have changed, and what worked three months ago is, in some cases, entirely irrelevant now. Some companies may choose to push the performance review to when employees return to the workplace. But this may take a while. Should employees have to wait until then to hear from their managers?

“The pandemic creates an opportunity to transform the often-dreaded annual performance review,” says Lori Holsinger, Ph.D., senior principal at Mercer, a global consulting company. “In a time when uncertainty abounds, companies have a unique opportunity to deliver on what employees crave most from their managers: authentic interactions that help clarify how the employee can grow their skills and careers as well as contribute to broader goals.”

But pandemic or not, frequent feedback is the only way to go, says Sirmara Campbell, chief human resources officer at LaSalle Network, a national staffing, recruiting, and culture firm. “We practice on the spot feedback because when you refrain from giving an employee feedback, you’re holding back their growth and development, which is why we don’t believe annual performance reviews are productive. When managers wait to give feedback, they waste weeks or months of productivity than if the employee received feedback on the spot.”

What are the issues with an annual performance review – especially post COVID-19?

  1. It probably requires employees to meet goals that were set before the pandemic set in and changed the way we work. Are those goals still good measures of employee performance?
  2. It needs you to assess something employees did throughout the year. If they performed well at the beginning and started to lower productivity now – because of the pandemic – would that be a fair way to review their performance?
  3. Is it wise to delay the annual review process until you meet employees in person? That can further delay feedback that they are already craving – some reassurance that their performance is adequate and their jobs are safe in this environment.
  4. Managers and supervisors are probably managing a remote team for the first time ever, and asking them to assess annual performance based on a mix of remote work and on-site work may be challenging.
  5. Employee roles may have changed, and they may have been assigned to newer roles. How does one account for that in an annual performance review?

How to Phase Out the Annual Performance Review

Holsinger asserts, “The best approach to performance management is to align it with the business strategy, which can sometimes vary even within a single organization. If the business is stable, then the discussions about priorities and goals will not need to be revisited as often. If it is a high-growth or start-up business, then the discussions about priorities and goals would need to be more frequent.”

And Campbell notes that, “Companies should not go away with reviews entirely without replacing these conversations, whether it’s dedicated time during one-on-one meetings between the employee and manager or scheduled quarterly conversations. Over communicate with employees to changes and explain the reason for the change – in that their growth and development is a priority to you and by providing feedback more frequently, it will help them learn, grow, and develop faster.”

As the saying goes, you do you. But how? Here are a few tips.

1.       Decide what an alternative feedback interval might be

Will it be weekly, monthly, quarterly? “If it works for your organization, performance reviews should be done quarterly or biannually,” says Campbell. “We conduct them quarterly at LaSalle Network and by no means does that mean feedback is reserved until the review.”

One way to decide this is to review the productivity metrics of your organization and evaluate historical performance pre and post an annual review. This may give some insight into how effective a shorter feedback duration may be.

If you haven’t been collecting this data, survey your teams to evaluate how often they would feel comfortable having their performance evaluated and receiving feedback. Similarly, managers should also be surveyed on how often they feel feedback must be delivered to their team members.

“Do you want to grow revenue? Do you want to promote your employee? Do you want to be promoted? Understanding what the company and individual goals are can help outline how often and the format in which feedback should be given,” says Campbell.

2.       Train managers to have regular feedback sessions

With everyone working remotely, this is probably the first time a lot of individuals are managing remote teams. For a generation so used to being online and in front of the camera, some of us may still need training in professional virtual communication.

“Companies need to train managers on productivity delivering feedback so that it motivates the employee. This means giving both criticism and appraisal, although it may be difficult, will be beneficial to all parties involved,” says Campbell.

While role-playing activities may be challenging for employers, online sessions that allow simulation of situations in which remote managers give feedback to their remote teams would be ideal in training them.

“A virtual performance review can be near identical to an in-person one,” adds Campbell.

3.       Evaluate how rewards will be tied to the continuous performance management process

Appraisals are an essential outcome of a performance review, no matter when they are given. But rewards don’t have to be tied only to the annual performance evaluation. Continuous evaluations throughout the year can culminate in an annual assessment of overall performance, which can then be tied to the appraisal and promotion process.

“If you’ve done quarterly evaluations, continue that cadence and don’t pause anything in fear of providing feedback during a time of heightened stress brought on by the pandemic,” advises Campbell. “The only part that might change is if your organization’s performance reviews are tied to bonuses or reward, which might not be feasible for our company. So, address any changes or expectations to the typical review with the employee before having it.” 

4.       Empower managers with performance management systems to track employee performance

One of the drawbacks of continuous performance management can be what Campbell tells us is the “recency effect.” So when phasing out the annual performance review in this environment, Campbell reminds employers to “evaluate the employee for the entire performance period, including taking into account performance before the [COVID-19] outbreak.”

However, addressing employee performance as a remote worker will also be essential, particularly if this trend is going to continue and your business has decided to make remote work permanent.

A performance management system can help define and track employee goals, establish productivity metrics, and tie performance with outcomes instead of output. This works especially well when employees work remotely so that they can focus more on completing the task than being available for a fixed set of hours.

“Technology provides the medium to document expectations and summarize performance contributions but it does not replace a meaningful discussion that helps employees see actionable steps they can take to refine their strengths and modify those areas that are holding them back,” says Holsinger. This is where the importance of training managers in delivering positive and negative feedback, providing constructive criticism, and doing all this on a video call cannot be stressed enough.

The automated performance management system you choose must be entirely secure and be given role-based permissions. Additionally, most performance management systems can be customized, so ensure that you choose one that helps you set and track goals specific to your organization.

5.       Notify employees about this change

A sudden change in the performance management process can worry employees, leaving them concerned about their performance.

But Campbell advises, “So long as you’re communicating the why behind these changes and that they are company-wide, the employee won’t think that they are receiving more feedback because they’re doing something wrong.”

Holsinger further adds, “Call it ‘annual’, ‘weekly’, or ‘continuous,’ it does not matter. What matters is whether the employee can say yes to the following questions:

‘Do I know what my priorities are and how I contribute to the team through my job?’

‘Do I understand the specific actions to take to optimize my strengths and refine my development areas?’”

These are the questions employees will be expected to answer, and how they should be approached about the change in the system.

Performance Reviews in a Post-COVID-19 World

Performance reviews need to become more people-centric in a post-COVID-19 world. We don’t have a template for a new way of conducting performance reviews now, and organizations and HR will have to build on these as they go. Some points that can contribute to the development of this template may be:

1.       Leading performance reviews with empathy and compassion

Employees are navigating difficult times with children at home and elderly care, among other challenges. If they cannot do their jobs as effectively remotely as they might have been able to in the office, this should be accounted in their performance review, especially since there seems to be no end date for the crisis, and as some employers decide to continue with the remote work model.

2.       Assessing resilience instead of revenue

While revenue generated may be a great way to assess employee performance, assessing for resilience in the face of daunting challenges can help identify a long-lasting, valuable employee.

3.       Communicating expectations clearly

As you move to a more agile performance management process in the current environment, Campbell suggests that the language you use changes. “Since there is still uncertainty with how the economy will pan out and how organizations will continue, consider replacing phrases like “moving forward, I would like…” with ‘for right now, I need you to…’ so that employees know to adapt and stay flexible.” Such clarity is essential regardless of the environment because it gives employees a clear-cut direction in which they must progress. As Holsinger says, “Frequency is less important than clarity.”

Finally, the best way to ensure that your switch from an annual performance review to a more regular feedback system is to start with a small focus group where you test the feasibility of the new system. Then move on to the whole organization. Track the effectiveness of the new system. Then move on to the whole organization. Track the effectiveness of this switch and continue to take feedback from employees on their experience with the process. Only then can you develop a sustainable continuous performance management process.