Is it better to to give or to receive? When it comes to annual performance reviews, it seems that it doesn’t matter which end of the conversation you’re on. No one ends up feeling good.
Mounting evidence suggest that neither workers and managers find the process helpful and some companies are making sweeping changes to address the issue. In a survey of 1,500 U.S. office workers, Adobe found that annual reviews are among the most stressful and least productive parts of our work lives. In fact, one-quarter of men and 18 percent of women report that they have cried after a performance review. The stress is so much, according to the study, that 41 percent of office workers would switch jobs – even if their salary and title didn’t change – just to avoid having to endure the process year after year.
In the same study, Adobe revealed that traditional performance reviews are considered unproductive and irrelevant by both employees and their managers. On average, managers spend more than two work days preparing for each review – or about 17 hours per employee – and 57 percent of those managers reported that, despite the time spent, performance reviews didn’t have the intended effect of improving employee function. Not only were they ineffective, but 61 percent of managers believe that the amount of time spent on reviews negatively impacts their own jobs.
There may be some good news on the horizon, however, as companies begin to rethink not just the method of employee reviews but their purpose. So, if the year’s most dreaded meeting is getting a major makeover, how will it look?
Focusing on the future
Amy Armitage, director of member research programs at the Institute for Corporate Productivity (i4cp), leads a working group on performance management and engagement, which boasts members from approximately 50 companies who come together monthly to discuss performance management challenges. From her conversations with the group and i4cp’s own research, Armitage is finding that many organizations are now looking at performance review through a new lens.
The trend she sees in performance management is a move towards a “future-focused approach” to performance. Instead of looking back at an employee’s past mistakes, i4cp research suggests that many companies are embracing the idea of looking forward towards behaviors and skills that will drive a company’s key objectives.
An i4cp survey found that while only 10 percent of businesses reported that they had scrapped the annual review process altogether, 67% of the 244 participating companies reported that they have rethought or planned to rethink their current performance management practices.
“We have seen a tremendous focus over the last couple of years on improving the employee experience and what companies must do to retain the top performers,” Armitage said. “There is a lot of stress around traditional performance reviews, and I see this change as part of improving the employee experience.”
Companies are taking action
Adobe is a leader in this sea change in performance management. In 2012, based on employee feedback, the company decided to switch from an annual performance review model to what it calls, “Check-ins.” Unlike annual performance reviews, which rank employees and reward them based on that ranking, Adobe’s Check-in system assesses employees’ performances as individuals.
Also, unlike the typical annual review, during which year-long goals are set but rarely revisited until the next review cycle, the Check-in system allows Adobe’s managers to have ongoing conversations with employees. These ongoing discussions offer the opportunity to give and receive feedback and to have a dialogue without the burden of writing a formal review.
The company reports that switching to the Check-ins model has saved the company 100,000 manager hours per year. The results have been so positive, in fact, that Adobe is now open-sourcing its Check-in program to help other companies achieve the same results.
In July 2015 GE also decided to discontinue its annual reviews and the use of an employee rating scale. According to a statement provided to BOLD, “The decision to remove the annual individual rating was another iteration of our Performance Development journey. We piloted the removal of ratings with 30,000 employees across several GE businesses in 2015. We learned from the test that managers and employees had richer dialogues focused on employee impact and development to become even more effective and impactful, instead of giving an individual rating to categorize their entire year of work. We debunked the myth that differentiation in rewards planning could not happen in the absence of a label or single rating.”
According to Armitage, global insurance provider Cigna also recently replaced its old approach to performance management with what it calls Connect for Growth, a program that it says is focused on, “energizing people, helping them grow, and making connections all leading to better customer, company, and employee outcomes.”
The program introduced some significant changes in the way the company conducts performance reviews, including eliminating the formal ratings the company used to use and replacing it with a system that determines whether an employee is “On Track” or “Off Track.”
“They have eliminated their annual performance reviews, but they have quarterly check-ins and are offering a lot of feedback. They are still doing differentiation of performance and pay for contribution and doing a lot of interesting things around creative pay,” Armitage said. The changes, she said, are enhancing the kinds of conversations managers can have with employees about what to do to improve their performance.
According to Armitage, how annual reviews are changing isn’t as important as why. Since the disdain most employees feel for the traditional annual review has existed for decades, what has finally prompted these changes?
There are several factors at play, according to Armitage. The first is a push from workers– from baby boomers to millennials – who have repeatedly told companies that the old system is just not working for them.
“We have seen a tremendous focus over the last couple of years on improving the employee experience and what companies must do to retain the top performers,” Armitage said. “There is a lot of stress around traditional performance reviews, and I see this change as part of improving the employee experience.”
Another major factor, she said, is the need for businesses to be able to adapt to changing markets quickly, which requires priorities to shift at a brisker pace. “Companies need to be able to react more quickly. Adobe, for example, was doing product development and they needed to accelerate it, which meant working faster and having more frequent conversations with employees about how to adapt to business conditions more quickly… So, I think changes in the way performance is measured stem from the changes that companies need to make to survive and win.”
