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Would it surprise you that, according to the research firm CEB, 95% of managers are dissatisfied with how their company conducts employee performance reviews?
And would it surprise you that 90% of HR managers say that annual performance reviews generally don't yield accurate information anyway?
These findings probably don't shock you a whole lot since you are most likely one of those managers or HR peeps.
I couldn't agree more.
The annual performance review is mostly counterproductive. Once a year the manager sits down with the employee for the supposed purpose of rating their performance, tossing some feedback at them and informing them of what raise they may or may not be getting.
Managers don't like doing them. Employees don't like enduring them. So excruciating are they that many managers blow them off, procrastinate doing them or do them half...umm...baked.
Even when they are done in a timely manner they are mostly done badly: "Here's how you performed. Here's where you need to improve. Here's your rating number. C ya."
Further, senior management often uses the review not first as a way to evaluate employees, but first as a way to control costs.
Some companies, for example, rate on a bell curve so there can be only so many fives, fours, threes, etc. Or senior management will simply lay out a dictum that you are not allowed to award anything above a certain number.
So then the annual review becomes not a tool to accurately review the employee, but a tool to cut back on expenses. What you end up with then is employees being evaluated inaccurately, because the primary motive and purpose of the review has shifted from giving the employee accurate feedback to saving the company money.
I encourage a much more natural and effective way of assessing and rewarding deserving employees: That is trusted middle managers giving consistent feedback to their employees without this annual trip to the gallows.
Employees need to know where they stand always. Managers need to be consistently communicating expectations and feedback on performance.
And then I think this: CEOs do have a right and a responsibility to control costs in their organizations.
But rather than achieving that by dictatorially controlling employee reviews, each manager should be given a bag o' money for raises to be allocated as they see fit.
So the CEO controls the total amount allocated and the managers do the allocating.
By this, costs are controlled, middle managers are shown trust and employees are rewarded as close to fairly as possible.
Accenture, one of the largest companies in the world with 330,000 employees, has seen the light.
They are ending the practice of annual performance reviews and going with a less onerous and a much more flexible, and consistent system of continuous feedback.
A client of mine handed me an article recently written by Lillian Cunningham of The Washington Post outlining Accenture's decision and reasoning.
According to Cunningham, six percent of Fortune 500 companies have ditched the annual review. Microsoft did two years ago.
Their reasons? The time, money and effort spent on this formal review process did not get the one thing a company desires: better performing employees. As a matter of fact, there are studies that suggest the exact opposite occurs. Employees become worse.
Too, according to Cunningham, it is estimated that the average manager spends more than 200 hours per year on performance review related activities-paper work, forms, training sessions for how to properly conduct a review and actually giving the reviews.
Whew. What could you do with 200 hours?
I have an idea.
Those hours could be used coaching up our employees; training them, encouraging them, holding them accountable, patting them on the back and giving them consistent feedback that they can actually learn from.
In other words the activities that actually do produce better performing employees.
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