Theoretically, performance management should happen every day. Think of it this way, if Lionel Messi was playing in a way his manager Luis Enrique didn’t like, would he wait until the end of the season? Absolutely not. They would address the problem immediately and send Messi in the desired direction.
HR researcher Josh Bersin has estimated that 70% of Multi-National Companies are moving away from the outdated annual review approach to performance management. Unsurprisingly technology firms such as Dell, Adobe and Microsoft are leading the way. Several professional services firms including Deloitte, Accenture and PwC have joined the movement. Even GE the long-time proponent of the traditional appraisal has decided to axe its annual appraisal model. Here’s why.
Lack of Efficiency.
Appraisals take a lot of time to complete. In a study by the advisory service CEB, the average manager reported spending about 210 hours—close to five weeks—doing appraisals each year. Yet despite this, 90% of Human Resource managers believe that annual reviews do not yield accurate information. Aside from the obviously labour intensive nature of annual reviews, they also don’t do the environment any favours as they generate large amounts of tedious paperwork.
Stunted Progress.
By definition, such appraisals are only carried out annually. Therefore valuable time, efforts and resources can be wasted as employees can spend a considerable chunk of time heading in the wrong direction. With regular re-evaluation of progress and goal setting, such time wasting and retarded progress can be prevented.
De-motivational.
To make performance appraisals easier to complete, they are simplified for the manager, thus the subordinate is generally rated on a numerical scale of sorts. Social science research indicates that employees would much rather be considered ‘average’ (a rather depressing state of affairs) than an assigned numeric value for their efforts. The employee experience is important; and as such employees want to be thought of as more than a number; and based on that number, receive some sort of generic feedback. The entire annual review process is utterly impersonal, de-motivating and ineffective.
Failure to promote team work.
Teamwork is vital to the success of most companies. It is through the sharing of thoughts and ideas that people come up with new and innovative ways to operate and conduct their business. The annual appraisal pits employees against each other, as each member, tries to out-rank his/her colleagues in the continual struggle to achieve the highest ranking. This leads to a lack of cohesion and non-existent teamwork, in addition to a negative mentality and poor work atmosphere.
Rigidity of annual appraisals.
As these appraisals are carried out (and very often mandated) on an annual basis they are thoroughly rigid and inflexible. This provides companies with a very real problem as company projects may vary in duration; ranging from weeks, to a month or an entire business quarter. Therefore a review process should be flexible enough to reflect the changing work environment.
As so many companies are overhauling their reviews processes, there is little disagreement that continuous and transparent feedback is the key to effective performance management. This transparency indicates the need for a two way flow of information between the employee and the manager. The best performance review systems make it easy for the employee to provide feedback for their manager, not only receive it. The review process, should be a two-way street, with traffic flowing both ways. For further reading, why not discover why Adobe, Deloitte and Accenture ditched the annual review process in this white paper from Impraise.