Why It’s Time to Replace Your Annual Performance Reviews

All of us have experienced the anxiety that comes along with the dreaded annual performance review. No matter which side of the table you’re on – whether it’s giving a performance review as a manager, or receiving one as an employee – it’s safe to say it’s uncomfortable.

The universal question is, why are we still doing them? The answer, “It’s a standard practice in business,” is no longer acceptable. We live in an age where everything we’ve ever known to be true in business is being flipped on its head. Startups are defeating market giants, major corporations are allowing employees to work remotely, and the business suit has become a rarity.

Times are changing, and it’s time annual performance reviews change as well.

Below, I’ll outline a few reasons annual performance reviews are no longer effective and what your organization can do to replace them – along with a few examples of companies that have successfully implemented alternative performance review processes.

Why Performance Reviews Don’t Work

They’re expensive.

Performance reviews stop entire organizations in their tracks while they’re going on. Before their reviews, employees waste time worrying about how it’ll go. Afterwards, they lose more time interpreting how the performance review went. This anxiety is costing your organization money because when employees are distracted, they aren’t offering your customers the best experience possible.

They pit employees against each other.

Strong organizations have strong work cultures, where employees feel like they’re friends as well as colleagues. Performance reviews make it difficult for strong company culture to flourish.

Suddenly, employees feel like rivals, rather than teammates. “Why is Dan so happy about his performance review? The boss must think he’s more capable than me!” “Megan seems pretty beat up about her review. I want to check on her, but I don’t know if it’s my place.”

They simply aren’t effective for managing Millennials.

I know managers get tired of hearing about Millennials and how they should be catered to. But by 2020, Millennials will make up 46% of the workforce – that’s one out of every two employees.

Understanding how to effectively engage Millennials is hugely important for the future success of your organization. Remember, Millennials grew up with the internet and its instant gratification – and this technological shaping has followed them into their careers. They want – and need – to know how they’re doing regularly, not just once a year during an intense and nerve-racking annual review.

Successful Performance Review Alternatives

So, if performance reviews don’t work, what should you do instead? The answer isn’t just to let your employees run free -–and it isn’t to give daily, time-consuming feedback.

Check out the following alternatives other companies have implemented to see what might work for your business.

PwC

Back in 2013, PwC tossed performance reviews and moved to a mobile app called Snapshot, which allows employees to request feedback from their peers and managers at any time. Marique Newell, a manager at PwC, shared her perspective on what led to the switch: "You don't give elite athletes coaching at the end of the season, you give it in the middle of the game.”

Retrofit

Retrofit is a tech startup that offers personalized holistic weight management. It also made the move to scratch performance reviews, but decided to go in a different direction than PwC – the company utilizes an app called TINYpulse that enables Retrofit managers to give shorter reviews a couple of times each month. "I think it will absolutely be a time saver," says Whitney Mirro, VP of Operations at Retrofit.

Accenture

With Millennials accounting for 72% of the workforce at Accenture, the company decided to adopt a more social and transparent approach, implementing both coaching and a feedback app.

Ellyn Shook, Chief Leadership and Human Resources Officer notes, “A message that rang loud and clear was that people didn't like the infrequent, backward-looking reviews that didn't feel personalized around their individual development.” This was a huge motivator for Accenture to make the push to revise its strategies for giving its employees feedback.

Other Alternatives to Performance Reviews

While the companies described above all replaced traditional methods of reviewing performance with mobile apps, there are other options to consider.

The open door policy

Remove performance reviews by encouraging employees to talk with their managers whenever they’re seeking feedback. Oftentimes employees don’t approach managers about performance because they don’t want to be a hassle or a burden on the manager.

Tell your employees that it’s okay to have doubts, but to communicate these doubts to their team leaders. It’s okay to be vulnerable in business and with your team – that’s what builds stronger teams.

Monthly email feedback

Once a month, have team leaders and managers send short, concise emails to their employees that cover three things they’ve been doing well and one thing they can work on. They don’t have to be 1,000-word short stories; they’ll be just as effective if they’re simple and to the point.

Five-minute touches

What if, once a month, managers took the time to seek out each individual employee and tell them where they’re doing a good job and what they could be doing better? If someone is managing 12 employees, this will take just one hour out of every month, while giving employees the reassurance they crave.

Performance reviews need to be a thing of the past. Not only are they ineffective and costing your organization money, but they also stifle company culture. Recognizing how detrimental they can be, nearly 10% of Fortune 500 companies have already made the move to ditch the annual performance review.

Will yours be next?

Leave me a note below sharing the way your organization handles performance reviews. Are you still using an annual review system, or have you shifted to a more modern way of giving feedback?

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