There has been a lot of discussion about the efficacy of performance reviews, or lack thereof, and the value to organisations of continuing to invest in this process. Let’s face it, when companies report that they spend huge amounts of time and money executing a strategy that is designed to lift performance, and it doesn’t, then why would they continue with it?
Whilst ceasing to use performance reviews may seem like the logical next step, a closer look at what they are and asking some questions about why they don’t seem to be working might be wise before assuming they’re a waste of resources. Let’s face it, from an investment standpoint your people are a huge investment. Why wouldn’t you do everything in your power to leverage the return?
So what is a performance review?
The workplace performance review, in its basic form is a discussion between a manager and a team member about the team member’s performance and development. Many organisations conduct these formal processes annually, however there is a lot of variation. There are organisations who conduct bi-yearly, quarterly and some even formal monthly reviews. The cumulative results roll up into a final score or rating at an annual review conducted each year.
The benefits of more frequent discussion are that performance can be corrected quicker and easier, and feedback can be given in a more relevant way. The downside is that more frequent often means increased cost.
So what’s the problem with the performance review system?
1. Once a year is not enough
The worst performance review practice is one where the reviews are irregular or occur only once per year, with no appropriate discussion or performance feedback in between. For performance feedback to be effective in changing behaviour and shifting overall performance, it must be consistent and timely. Annual reviews are too far apart to have a positive impact on performance.
In fact a negative performance review has been shown to produce a decline in an employee’s performance during the coming year.
2. Poor Perception
There are a number of issues with the way performance reviews can be perceived.
● It may be linked with the management of poor performance
● It may be seen by both managers and employees as a one-way interaction
● It may be viewed by managers as just another task to be completed
● It may be feared by employees as they often don’t know what to expect, especially if feedback between reviews is irregular or inconsistent
The outcome of an annual review can also have a major impact on salary and bonuses awarded as many organisation link these processes. Poor review means limited opportunity for either a pay increase or an annual bonus.
3. Low Levels of Manager Capability
Most organisations have done little to equip their managers, let alone their team members, with the skills required to execute effective two-way performance appraisals. The leaders of teams often do not receive effective feedback or workplace coaching themselves, and may not have been armed with the skills to deliver them. Even if they have been provided with the tools, it is often seen as just another thing to do or a waste of time rather than a fabulous way to create greater team member engagement and bottom line results.
This poor understanding of the benefits of the effective use of performance management tools leads to an overall lack of engagement with the process and reduced effectiveness to positively impact workplace behaviour and overall performance.
It’s not surprising that in this environment an organisation would think their Performance Review processes were a waste of time and money.
So what’s the answer?
The answer is to refine the current way performance management occurs and the culture within which it exists. Changing behaviour to lift an individual and teams performance takes a consistent concerted approach that engages the employee as a hero in their own performance and professional development. To do this, line managers need to see the benefit of taking the time each week to provide feedback, coach their individual employees to ensure they have the skills to do the task at hand and the encouragement to go above and beyond in their role.
Managers and their team members need to be willing to celebrate milestones and achievements rather than continually looking at the performance deficits. In fact, recent research shows that positive annual reviews lift performance in the coming year, whilst negative reviews have the effect of decreasing performance even further.
Additionally, the barriers restricting regular feedback need to be broken down. This will help to create a culture of honest and open dialogue around performance, and a group commitment to continual improvement. There are several software platforms that can assist a business to achieve this with relatively low cost. Finding the right tools to support performance reviews and minimise the cost are essential in balancing this important investment.
In 2015, Deloitte Australia announced that they were ditching individual performance reviews in favour of giving regular feedback, weekly 10-minute catch-ups with each team member and coaching. To us, this seems to be a step in the right direction to more effective performance management where performance can be constantly reviewed. Instead of getting rid of performance reviews they’ve simply refined the process so managers provide consistent feedback and support to gain better outcomes. Sensible move!