The Dreaded Annual Performance Review Inches Closer To Extinction

IBM joins a growing group of employers in ditching one of the most-hated practices in the business world.
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Annual performance reviews are the worst, and more and more companies are getting rid of them.

IBM is the latest to see the light. This week the tech company announced it was ditching its traditional performance review process, in which employees were ranked on a 1-5 scale every December, set goals for the new year in January and "checked in" on those goals six months later.

The review just became an "irrelevant discussion," IBM's chief human resource officer told Fortune magazine. The company is replacing its annual system with a new system, called Checkpoint, that will let managers evaluate underlings in a more realistic time-frame -- i.e., not just once or twice a year.

That yearly pace makes little to no sense in 2016, when businesses move pretty quickly. The question is: Will a system of more check-ins be any better than the old system? Or has IBM just built a more cumbersome bureaucratic mess?

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The tech giant -- IBM employs 379,592 people -- joins a growing list of employers who've ditched the antiquated, counterproductive and expensive practice of rating workers and holding them accountable to goals set only once a year. General Electric, Microsoft, Deloitte, Accenture, SAP, The Gap, Cargill, Juniper and Adobe all have tossed the stale formula in recent years.

(Full disclosure: This author is currently awaiting her annual performance review.)

Researchers and companies say that ranking people essentially makes them feel bad -- and it also pits workers against each other. Microsoft's old "stack-ranking" system only allowed for a limited number of top performers, which had the effect of turning the tech company's best people against each other as they positioned themselves for raises.

In Yahoo's case, the ranking system is also drawing a lawsuit, as a former editor filed suit against the company claiming the ratings were manipulated to fire people without cause.

"The metrics are baloney," Samuel Culbert told HuffPost a while ago. A consultant, author and management professor, Culbert caught the Internet's full attention in 2008 after his Wall Street Journal essay titled "Get Rid of the Performance Review!" become one of the site's most popular articles (it's also the title of Culbert's book).

He pulls no punches when it comes to his utter disdain for the time-honored corporate practice. "Performance reviews are fraudulent, bogus and dishonest. They support bad management," he said.

Putting a number on someone's performance essentially triggers their threat response, Josh Davis told HuffPost last spring. Davis is a psychologist, author and director at the NeuroLeadership Institute, which consults with businesses on performance issues.

"Probably for most people if you say, 'Hey, it’s time for our performance review conversation,' you’re going to activate the fight-or-flight response, that’s a safe bet," Davis said.

The employee then becomes defensive going into the performance review. What should be a conversation about getting better at your job "becomes an embattled argument," he said.

For businesses, the process is also shockingly expensive and time-consuming. Managers at The Gap were putting 130,000 hours of worker time into reviews, Dan Henkle, then Gap's human resources vice president, told HuffPost last year, citing 2014 data. It cost $3 million a year. Now the retailer is using a system of "regular ongoing feedback," said Henkle, who is now the company's director of sustainability.

Making sure workers know where they stand all year round? Of course that makes better sense than waiting every six months to give meaningful feedback.