Why Annual Performance Reviews Are Crap, But Don't Have to Be

What began as a staple of corporate process persists decades later as a rather unexamined policy. Why do we still use this antiquated method of collecting information and evaluating employee performance?
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This post originally appeared on the 15Five blog.

Why does outdated technology persist long after something better comes along?

Plumbing was invented by the Minoans in the 18th Century BC, and yet some people insist on doing things the old fashioned way.

Every day at work, we engage in certain processes and behaviors without questioning them. The annual performance review is a perfect example. What began as a staple of corporate process persists decades later as a rather unexamined policy. Why do we still use this antiquated method of collecting information and evaluating employee performance?

Why Do Performance Reviews Persist?
The annual review process is hated by both employees and managers, yet most companies continue to use them without question.

I am reminded of the old story about a girl who is learning to cook meatloaf with her mother for the first time. After careful preparation and shaping, the mother cuts off the ends of the loaf and places it into the pan. Curious about this seemingly nonsensical behavior, her daughter inquires as to why the ends are removed.

Her mother thinks for a minute and says, "Well, that's what my mother always did." At the daughter's insistence, they call the girl's grandmother. Grandma says that she always did it because that's what her mother did.

Curiosity gets the better of them, and they travel together to visit the girl's 90-year-old great-grandmother. After hearing the question from her inquisitive descendants, she laughs and replies, "Why are you cutting the ends off? I only did that because my pan was too small!"

Millennials Don't Even Eat Meatloaf
Today we have a bigger pan, but we are still cutting the ends off of the meatloaf. By that I mean that business models have changed dramatically. For most previous generations, an employee worked for the entire length of their career in the same field, often for just one company. The employee performance review made sense to evaluate someone who was working within one realm of expertise for 30-40 years.

Baby boomers were generally more static than today's Millennial workforce. They worked in a world of clearly-defined roles and hierarchies, where people began at entry level and headed up a ladder. Promotions and raises were given along the way. Performance was recounted and rewarded (or otherwise) by sitting down with one's boss every twelve months.

But the new generation of talented youngsters doesn't stick around for thirty years. You're lucky if they stay for three. With all that job-hopping, a yearly review means 2-3 in the lifetime of their employment with you. Why risk losing your A-players because they haven't gotten the feedback or support at the moment they needed it?

Recency Dictates Reality
Another facet of human nature is that we tend to keep recent history at the forefront of our memory. Even in the span of 24 hours this holds true.

Imagine you've had the perfect day. You wake up to a fabulous sunrise, your commute is quick and painless and you finish all of your work early. On your way home, someone steals your wallet. How do you think you're going to respond to your spouse when you're asked about your day?

Applied to workplace management, how can we be expected to give an assessment of performance for an entire year when we are hard-wired to judge based on the most recent memories? Two scenarios are possible here:

Scenario 1: You have an employee who is an average or below-average performer all year. In the last two or three months leading up to the review, he starts to step it up. Recent memory colors your judgment and you will likely tend to rate that person highly. What you fail to account for is accuracy in assessment over time at the moment you sit down to write their report.

Scenario 2: The employee is a solid performer who is suddenly encountering challenges. Perhaps these are job related or maybe they are personal. Trouble with a relationship, children, finances, health problems...there are a multitude of reasons for diminished performance. These recent issues have tainted an otherwise stellar work record. Again, you run the risk of seeing through too narrow of a lens.

The Powerful Employee Feedback Loop
I founded 15Five on the idea that success is built on a framework of communication. Since memory is inherently unreliable, regular pulse checks can supplement recent history with an objective historical record of performance that is more complete, comprehensive and qualitative. Every team member gets a voice, and leadership is able to monitor and archive real-time performance to form objective historical records and offer support when needed.

Evaluations are not just about bonuses and promotions. In fact, these extrinsic motivators are not what drive the modern workforce. Generations X and Y are driven by purpose and are highly motivated by feedback. When people are in the right environment, whether an employee at work or a running-back on the football field, people always want to improve. We allow them to tap into that desire by responding to their questions and guiding their performance.

Not only does feedback provide the proper context for team members to understand their roles, but the conversations spawned by this regular feedback loop supply the data needed to make timely organizational decisions.

If you wait to do a review once every year, you miss a huge opportunity to have your team operating at its peak potential. Priorities and shifts in the market occur all the time, not just every December. By neglecting regular check-ins with talent, leaders are unable to collect valuable information that could mean the difference between success and failure. Checking in quarterly, monthly and weekly will provide valuable information that can be acted upon in time to make a difference.

David Hassell is the founder and CEO of 15Five, the leading web-based employee feedback and alignment solution that is transforming the way employees and managers communicate. Named "The Most Connected Man You Don't Know in Silicon Valley" by Forbes Magazine, David has also been featured in The New York Times, The Wall Street Journal, Inc., Entrepreneur, Wired, Fast Company and the Financial Post. Learn more about 15Five and David Hassell at www.15five.com.

Image Credit: Charles Knowles

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