Annual Performance Reviews and Appraisals – still relevant?

The annual performance review and appraisal (APR) – where staff are required to complete a questionnaire outlining how they have performed over the past twelve months, what they felt was their best and worst work, and where they want to be in five years – has been part of the corporate landscape for decades. Yet last year David Arkell, head of human resources for Australia and New Zealand GE, a company recognised as an early adopter and champion of APRs, declared the performance review system ‘dead’. And with companies like NAB, Microsoft, Adobe, Motorola, Deloitte and Accenture announcing their decision to scrap the APR process, perhaps the time is ripe for considering whether this version of feedback and reflection is still relevant.

APR are expensive, time consuming and anxiety causing exercises. In my experience APRs involve a manager and an employee awkwardly sitting in an office scrambling to think of things to talk about to validate the gravity of the meeting. Each person feels they are somehow in a combative interchange, and generally in the weeks leading up to the meeting each will have thought of examples to support ‘their side’ of the conversation – where the staff member wants to be paid more they will produce evidence of exceptional work, while the manager often wants to get the staff to do more work for less, and may look for and overplay examples of underperformance to bargaining down a bonus payment or salary increases.

Many problems have been identified with the APR process. In some instances, companies use the reviews to rank their employees (either publically or privately) against one another. Known as forced ranking, this the system championed by Jack Welch of GE in the 1980s and reflects the shoulder pad wearing, big hair style, aggressive Wall Street approach to business and career progression of that decade. The workers in the top 20% were rewarded, the middle 70% were average workers and got nothing, and the bottom 10% got fired. The concept of rewarding workers and letting go under performers in itself is not unreasonable, but the criteria used to arrive at those rankings and the methods for rewarding the top players have, over time, become viewed as inadequate and counter productive.

APRs are almost always linked to remuneration changes – both up and down – and bonuses. Many critics observe that reviews generally only reflect upon recent work rather than the entire twelve month period. This is because human inability to recall in detail much beyond the previous 6-8 weeks means generally speaking it is only the work and attitudes during the most recent past period that form the basis of any review. Hence anything achieved by a staff member ten months ago will play little part in the assessment. Put in a more Machiavellian way, as an employee I only need to lean in for the two months leading up to my annual review.

APRs are expensive. The Washington Post recently reported that management firm CEB, a company that employs 10,000 people, spends $US35 million ($47 million) a year on APRs – that’s $3500 US per person – on the interview and assessment process alone. This figure excluded any increase to salary or costs of disciplinary action resulting from the assessment.

Comparing staff to one another, or assessing all staff for their work contribution via the same set of specific, possibly restrictive criteria is likely to result in an outcome which demoralises a team, rather than motivates. If one employee sees praise (and a raise) heaped on another staff member for work done in a particular area, yet cannot engage in the same way due to the parameters of their own position in the company or job criteria (a criteria they must ensure they can demonstrate they have met when they have their next annual review), an APR may leave staff feeling disengaged with both their job and the company.

By their nature APRs are an individual process, rather than a group one. If I’m an average employee working in a company where salary increase or bonus are directly linked to APRs, I know I need to meet the goals and criteria spelled out in last year’s annual review. I’m unlikely to waste time helping a colleague on a project which does not directly relate to these goals. APRs may encouraging staff to focus on individual goals rather than overall group or company goals that would provide for a stronger business in the long run.

Fascinatingly neuroscience research shows conversations about remuneration and bonuses provoke a “fight or flight” reaction among employees, making them much less receptive and responsive to coaching. Hence employees who are underperforming will not improve where discussion about the need to improve is linked to a potential reduction in pay or bonus. On the flipside, a good employee who needs to meet a fixed criteria to receive increased remuneration, is unlikely to be initiative in their approach to work – keep your head down and keep ticking those boxes!

Perhaps most relevant of all, is the fact that the idea of the APR was first developed in the 1960s during a time when the typing pool reigned supreme, there was no such thing as a fax let alone internet, and snail mail, telegram and telephone were the only means of communicating. Many people worked for the same companies all their lives, gradually progressing up the ranks as experience, skill and, more often than not, age permitted. Under those conditions, having annual corporate goals, and an annual review of where everyone was sitting in the context of those goals was appropriate. The review was undertaken by the employee’s direct manager – not the HR department, as became the preferred option from the 1980s onwards – and away everyone went for the next twelve months.

Much has changed over the past fifty years. We live in a much more agile environment, facing the development of new technologies and work challenges at a blistering pace. Business disruptions can come and go in a period of three months. What was a company’s biggest challenge in June may be forgotten by the New Year. Considered this way, only providing feedback on staff performance annually seems nonsensical.

Exacerbating the speed of change is the increased participation in the workforce by younger staff of a generation where feedback is an integral daily experience in their life. The term helicopter parenting was invented for the Gen Y/Millennium generations, and they have been coached and appraised from infancy by parents, teachers, instructors and coaches. Facebook, Twitter, Tumbler, and the myriad other social media platforms are purely about feedback – getting likes, reposts and comments are literally the core purpose of using these services. Without fairly constant feedback from their employers, these generations literary have no idea how they are tracking. The idea of waiting for their annual review, and hence going twelve months without feedback in the workplace, would for many be crippling. For those who find this need for constant feedback unnecessary, it is important to remember that regardless of your personal beliefs, it is a real need for a large proportion of today’s workforce – and it is unlikely to change just because you don’t like it.

Technology is keeping pace with these demands. Checkster.com enables employees to solicit feedback on their performance from peers, past colleagues and even clients. The service allows them to get back an anonymous report with feedback on their performance. The site boasts that it takes two minutes to set up a request, with feedback within two days. And note – recruiters and potential employers can use Checkster to screen potential new staff.
But it’s not just the youngsters of our workforce. Even LinkedIn, the social media platform used by professionals across all generations – where a staggering 37% of users are over the age of 50 – encourages and ranks participants on endorsements received from their peers.
Feedback is without a doubt important for moral, to keep staff on track and working towards unified goals. Feedback may also be legally necessary where that feedback is negative. Should a staff member’s underperformance be so bad that they are terminated, employers will need to demonstrate feedback was given to staff about the concerns. Without evidence of feedback, a wrongful termination may be brought against the company.

Regular feedback up the line to management is also needed or great ideas and opportunities may be overlooked. Making time for regular dialogue with staff may bring previously unconsidered projects or concepts to the attention of managers. Feedback also makes everyone feel like they are on the same team, not working away on a solo project unrelated to other employees or overall company goals.

So even if APRs may no longer be relevant in today’s workplace, let’s not throw out the baby with the bathwater. Coaching staff and providing feedback on performance is crucial for a homogenous, productive workplace. Some work places have moved to short weekly informal catch ups, one on one between staff and their direct manger. This might take as little as five minutes, be literally what are you doing, what are you priorities, any ideas or projects I should know about?

Exceptionally successfully Australian software company Atlassian, has replaced APRs with a form of employee feedback known colloquially as “weekly one-on-ones with a twist”. Essentially the company enables weekly catch-up between managers and employees whereby three weeks each month the meeting is about what the employee is working on and if they need any help or guidance. Once every four weeks, the catch-up is dedicated to a particular topic designated by the company leaders. Examples given are that the managers asks staff what they love about their job, or to outline what barriers they encounters in their job and how the manager can help remove them, or the discussion might be about where the employee wants to progress to in the company or in their career.

Others workplaces, including Melbourne HR firm wattsnextHR, have made the Friday afternoon wind down ritual compulsory, using the time to facilitate informal feedback from staff and allowing for improvements and adjustments to company directions as a result. The aim for both companies is purely to increase the level of personalised feedback.

The aim for establishing productive feedback is to ensure problems in a business – be they cultural, operational, with personnel or otherwise – are identified early and solutions can be established. Feedback may also take the form of conveying ‘big ideas’ or suggested pathways for company development. How your business does this will depend on the size of your workplace, the nature of your business and the physical location of staff.

Feedback should always be related to tasks and performance. Set a task for an employee who completes it on time and in an efficient manner? Tell them as soon as the task is done. Give negative feedback and witness that staff member address the issues you raised? Comment to the employee that you have noticed the improvement as soon as you observe it. Regular and meaningful feedback linked to tasks and performance and given in a timely manner is less time consuming, less expensive and far more productive than an APR. Hate giving positive feedback and feel it’s not your job to coach employees? I don’t want to be the one to tell you, but perhaps management may not be for you!

Simone Hill

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