Beware the rush to abandon Annual Performance Reviews

8 October 2015 | Feedback

The recent announcement by Accenture that it is to abandon its Annual Performance Review system has been greeted with a combination of relief and excitement from many quarters.

Accenture follows Deloitte, who announced their change through a Harvard Business Review article earlier this year which we wrote about in a post here. Microsoft, Adobe, Motorola and a string of other well-known organisations have also made the move in recent years.

As a business that has not used annual single measure ratings since our foundation 34 years ago, hpc welcomes the growth of this trend. It is undoubtedly a good thing. But only for organisations where there is a mature and transparent “performance management” culture. This is a culture of clarity of purpose and of expectations. And one featuring regular conversations between line managers and reports regarding performance – current and future.

A performance management system should be about getting the very best out of every individual for the benefit of both the individual and the organisation.

Clearly the conventional approach to Performance Management applied over the last 20-30 years is not working. Deloitte’s Human Capital report of 2014 revealed that only 8% of organisations believe their performance management process drives a high level of value. This was echoed in the CIPD Employee Outlook Report also in 2014, where results indicated that 44% of employees do not believe there is clarity of communication regarding their objectives and expectations.

Do these statistics and the departure of some organisations from Annual Performance Reviews mean that such reviews are worthless? Certainly a process involving complex competency frameworks, annual ratings and countless management meetings to ensure rating consistency makes for a torturous and inefficient process. Deloitte calculated they spent around 2 million hours a year in this manner. But even a cumbersome and flawed feedback process still provides a platform for some type of conversation even if only once-a-year. Research tells us that no feedback is worse than infrequent or negative feedback.

Reinvented performance management systems aside, the traditional Annual Review (with or without ratings) is meant to be a validation of regular formal and informal conversations about performance held throughout the year. The problem is, these regular conversations don’t take place, which makes for a very awkward and often painful annual conversation.

So before you rush to ride the wave and abandon your Annual Performance Review, you might wish to consider whether you can answer “yes” to the following three questions:

1. Does your organisation have a culture of aligning and embedding expectations concerning standards of performance and behaviour at a 1:1 level?

This is the foundation to enabling effective regular performance conversations referred to in question 2:

2. Will your Managers (at all levels) drive a culture of regular (at least monthly) formal and informal 1:1 conversations with reports about current and future performance?

Both Accenture and Deloitte have opted for more frequent conversations (Deloitte have gone for weekly check-ins – in a schedule driven by the employee).

3. Will your new performance measures be perceived at least as fair as your previous measures?

For all the ills of the old system, in general it was perceived as reasonably fair. Whilst Deloitte have introduced a range of new measures they admit they haven’t yet worked out what they will share.

There are certainly better ways to manage performance than annual reviews and ratings.

But the reality is that it requires far more 1:1 time, more frequent meetings and with greater honesty and transparency regarding current and expected performance.

Unless your managers are genuinely up for this you might be better off not throwing out the baby with the bathwater.

Author - David Storrs, hpc

David will be discussing Key Steps in Identifying and Engaging Talent at the upcoming IITD Guru event, on 18th November in the Morgan Hotel, Dublin. See here for more details and booking.

View All Thinking