Why Killing Performance Reviews Was a Mistake
The Performance Review Revolution of 2016
2016 was the year of many themes in business, probably most notably people freaking out about artificial intelligence and what that means for everyone. But it was also the year that a lot of people started discussing -- maybe not yet acting on -- how ridiculous the once-a-year performance review is. Apparently 70% of enterprise companies, including some legacy ones like GE, are considering changing their approach to performance reviews. Headlines scream from the rafters: “Is it time to kill performance reviews?” and “Five reasons to abandon the performance review.”
This isn’t surprising: studies have shown for years that people hate performance reviews, and that includes both employees (receiving) and managers (giving). I’m not going to belabor the reasons people hate them here; I think you’re all smart enough to see those. They’re usually low-context, rushed, and more about process/checking boxes than actually trying to develop the employee in question.
The Unintended Fallout
Well, as noted above, some companies are outright removing them. But … there’s a bit of an issue:
At firms where reviews had been eliminated, measures of employee engagement and performance dropped by 10%, according to CEB’s survey of nearly 10,000 employees in 18 countries. Managers actually spent less time on conversations, and the quality of those conversations declined. Without a scoring system to motivate and give structure, performance management withered. As one manager told CEB: “When I gave someone a low score in the past, I felt responsible for helping them out, now I just don’t feel that I have to spend time doing that anymore.”
So basically: companies are eliminating performance reviews because they see the flaws (or think they’re too time-consuming), and they’re replacing them with … nothing? And by doing that, managers are actually having less conversations? And those conversations are decreasing in quality? Egad.
The Problem Still Remains...
Unfortunately, most managers think of themselves as “Mr. (or Mrs.) Productivity”. They view their direct reports as numbers -- x-amount of KPIs achieved. This is unfortunately because a lot of our “management theory” comes from a 1911 book by Frederick Winslow Taylor. Henry Ford was competing with horses then, and now we have self-driving cars -- but we still design management best practices the same way. Insane.
The once-a-year review is great for lazy managers. You can essentially ignore your employees all year (except for when they screw up), have one elongated conversation with them, and pat yourself on the back about how great a leader you were. Organic feedback is much harder. It requires time, effort, eye contact, communication, genuine interest, emotional intelligence, conversational skills, and more. This is hard for a lot of managers. Do they know that it’s important? And if they do, who’s making sure that they have the training necessary to execute the feedback appropriately?
If you’re going to replace an annual performance review (which you should, because the rest of our economy is on-demand), you need to replace it with legitimate, consistent feedback. Issue: feedback is very rare in most offices, which is largely because it’s a very direct form of communication that we nonetheless root in many assumptions.
So What are We to Do?
This is the bottom line: work is most functional when clear priorities exist, those priorities are aligned with task work, and the people doing the task work get consistent feedback on how it’s going and if priorities are shifting. When we impede any of those three steps, work becomes confusing and challenging for all.
Aside from training managers better and contextualizing for them that their job is about developing talent and not just hitting KPIs, one easy solution is the 90-day review. 90 days is about a quarter -- which is how most companies tend to think -- and it provides a good time to take stock of how an employee is doing. It also feels less overwhelming to super-busy middle managers. We’ve still got a long way to go on how best to give feedback and evaluate employees, but every quarter is better than a once-a-year process choked in HR jargon.
What are your thoughts on the value of performance reviews and adopting my proposed 90-day review process?
Most Read IRIS Articles of the Week: April 17-21
Here’s a look at the Top 11 Most Viewed Articles of the Week on IRIS.xyz, April 17-21, 2017
Click the headline to read the full article. Enjoy!
Like so many others in the industry, I was wrong. For years, I was certain that the bull market was nearing its end. I thought the market was over-extended, and that, surely, the wild equities run was coming to an end. But everyone else was bullish, and perhaps rightfully so. And while I’ve watched equities continue on their spectacular rise, I do think now is the time (really!) to put a hedge in place. Here’s why. Here’s how. — Adam Patti
The realities for fixed income investors have changed. How is this being reflected in markets? Bond investing has become increasingly difficult over the past decade. Markets have been heavily distorted by ultra-low interest rates and quantitative easing, as well as by extreme risk aversion in response to the global economic crisis and the eurozone debt crisis. — Nick Gartside
Is being a financial advisor worth it? I am an optimistic person and I encourage other people to keep a positive mental attitude (shout-out to Napoleon Hill and W. Clement Stone). However, by taking a good, hard look at the negatives in life, we can successfully pivot towards the positive aspects that will help us achieve our goals. — James Pollard
How do you treat one of your most valued, existing clients? Here’s a list of some things that come to mind. — Andrew Sobel
According to many advisors I speak with, the only clients that leave are those who have died. And while attrition may not be a big problem in this industry, I have to assume that at least a few clients change advisors without doing so via the funeral home. — Julie Littlechild
I was talking with an advisor last week about how to get into conversations about what he does. He was relaying the story of going jogging with a friend who could be a good client but is, more importantly, connected to a large network of people who fit this advisors ideal client description. — Stephen Wershing
Big picture thinkers are not unicorns - rare and mystical. And they were not born with the innate ability to think big. They do, however, pay attention to the broader landscape and take the time to think, analyze and evaluate. — Jill Houtman and Danny Domenighini
Your reputation is who you are and how you show up, Monday to Monday®. Many of us take our image and reputation for granted. Give careful thought to the kind of reputation that you would be proud of Monday to Monday® and that would resonate with your purpose and priorities. — Stacey Hanke
The generational changing of the guard is a fact of life as old as time. Young replaces old in responsibility, importance, control and culture. Outside of the family, the workplace is perhaps where this is seen most regularly by most people. — Shirley Engelmeier
Next time you hear your prospects give you price objections, it’s not because of the price. The give price objections because they don’t know the full value proposition that they’d be paying for. And it’s not based on their need, or your features and functions. It’s based on the buying criteria they want to meet internally. — Sofia Carter
Last week we wrote about the economic rationale behind going independent vs. moving to another major firm as an employee. As a follow-up topic, we thought it prudent to analyze transition packages attached to big firm moves and peel back the layers of the onion to show the components of these deals. — Louis Diamond
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