Lately there has been a lot of buzz around performance reviews, and the overall consensus is everyone hates them, to varying degrees. There have been numerous studies that point to the unhappiness with and ineffectiveness of annual performance reviews. Many companies in Silicon Valley have done their own research, and have used that information to make changes. Two companies that have recently gotten rid of their annual review system, Adobe and Accenture. These large companies are listening to their employees and retiring out of date processes, you should do the same. I am here to explain a few reasons why people hate annual performance reviews and what might be a better way to provide feedback and keep your employees accountable.
A year is 365 days long with countless projects, several achievements, and maybe a few setbacks in between. How can one look back over the course of a year and remember everything they have accomplished? The truth is, they can’t, and that is one reason why the practice of annual performance reviews is falling out of favor. Employees want feedback on current projects so they can improve. Employees are interested in their future and how they can move forward. Goals should be set looking forward, they should not be stagnant.
Not only are performance reviews ineffective for employees, but they are also taking away valuable time and money from your company and more specifically your managers. DecisionWise did the math for us, and for a company with 500 employees, “The cost for the annual performance review process is about $120,000 just in the value of time spent.” Of course, for legal purposes you will want a paper trail, but it should not be costing you so much!
One big trend is to have a 360 review. 360 reviews are, “Your boss, your direct reports, and your peers give you feedback on what are your strengths and weaknesses (or “developmental needs” or “opportunities”). Therefore, you get feedback from everyone around you who knows you well.” This method involves more people and therefore there is less biases, but 360 reviews aren’t perfect either. If fully supported by all parties and has a multi-point follow plan these can be great. If the boss isn’t involved or there is no follow up plan in place this can result in lower team morale and ultimately end in disaster. Managers have biases even if they are unconscious ones, so it is important that the review is based on results and metrics, as well as personal on the job interaction. Try not to make it personal but keep it professional and relevant to job related issues
I suggest mini reviews or pieces of feedback that take minimal time and effort, but let employees know where they stand at any given moment. This would be a combination of the two most common types of review, annual performance reviews and 360 reviews, but they would happen quarterly. You would still receive feedback from the 360 group, but the follow-up would be different. With this method your manager would meet with you to go over the feedback and help you develop goals for the next quarter with it in mind. This allows employees to hear feedback from all angles, gets the managers involved, and even though these happen more frequently they would take much less preparation.
It seems as though the ultimate method hasn’t yet been discovered. Obviously, it is important to hold employees accountable and keep them motivated, but annual performance reviews aren’t the answer. If you have found a method that works for your company let us know! If you need help with any of your staffing needs give Menlo Partners Staffing a call (650)752-6193.