Why the Annual Review Process Must Die
If I say the words, “Annual Performance Review”, what do you feel?
I’m guessing that the miniscule level of positive emotions is lost in a sea of negativity!
Let’s face it, the process is primarily a source of dread and fear for employees and managers alike. None of us like to be judged, especially by the person that oversees our daily work, and even more so by our back-stabbing, “do-gooder” peers.
The reality is that 360 reviews and stacked rankings are better suited to an episode of Survivor, given the extent to which employees and managers alike try to game the system. Why then do organizations insist that managers provide formal feedback and rank their directs once per year, following some random industrial psychology blueprint from a bygone era? How about having managers deliver informal feedback more regularly; isn’t this the very essence of people management? What ever happened to celebrating team accomplishments which is the marrow of effective team building?
Annual performance reviews take many different forms, but what they do especially well is allow senior leadership to create a system of rankings and use them to remove power and authority from their people managers. The sentiment conveyed to managers is that, “No matter how happy you are with your team, you have to rank a few people high, a few people low, and most people average.” But what if you already have a highly effective team? Wouldn’t you want to acknowledge that each member is a stellar contributor in his or her own right, and do this on a regular basis? Not so much…
Another abysmal aspect of the annual review process is that it has become the annual promotion process at many organizations. This creates a never-ending cycle of winners and losers. Going into review season, employees are thinking, “Will I get a good review and get promoted?” Managers are thinking, “Can I get through the review season without losing anyone?”
The process for computing the overall rating is seldom transparent, often arbitrary, and always dehumanizing. This breeds fear, anxiety, and mistrust, which are the opposite of the feelings that people have on highly effective teams. Fortunately, a growing number of large companies having figured out that annual ratings are nothing more than garbage in, garbage out.
Recently, Adobe, Accenture and Deloitte ended their formal annual review process. Microsoft did away with what is arguably the worst of all review processes: stacked rankings. With 6% of Fortune 500 companies moving away from annual performance ratings, there is some question about what new process will replace it. But this misses the point completely: you don’t cure cancer by replacing it with a different type of cancer!
With annual reviews and ratings out of the picture, the focus can now instead be on handling the real issue, which is how to keep employees happy with their level of responsibility and pay, rewarding both individual and team performances. Again, the key here is to transfer power from the C-suite back to people managers. This can be achieved by training all people managers to give regular and timely feedback, allowing them to have more discretion over merit pay increases and incentive compensation awards, and further allow promotions to occur on more of an ad hoc (and as needed!) basis.
Good luck with your review!
The Devin C. Hughes Company inspires leaders, teams and organizations to kick-start growth and positive performance. A keynote speaker and author, Devin draws on his decades of experiences working with top teams, individuals and organizations to improve performance, engagement and outcomes. His new book, Note to Self, is now available. Sign up here to receive our monthly newsletter.
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A version of this was published previously in our newsletter.
