The Performance Review is Dead … or Mostly Dead

The standard for rating job success dates back nearly 80 years

Almost every employee dreads that one time every year his or her manager calls them into the small conference room and takes them through the often painful process of performance reviews. 

Managers equally hate them, believe it or not.

The Society for Human Resource Management (SHRM) predicted in 2015 that the annual ritual was on its last gasp. In 2018, a number of companies decided that was the case. Netflix stopped doing annual reviews. GE also called them archaic and dropped them.

But they aren’t dead yet.

WorldatWork found that 91% of businesses still conducted annual performance reviews in 2017. They are so imbedded in business culture that Capterra predicts 85 percent of workplaces will still be doing annual performance in 2025, if for no other reason that it’s the way things have always been done.

Close to two-thirds of both employees and managers believe annual performance reviews are not only outdated, they also are fruitless. Workers usually don’t agree with their evaluation, and managers spend a lot of time producing them – time that could have been better used.

Some workplace performance experts say annual reviews can be useful, but the ratings accompanying them should be removed. By dropping the expectation degrees (falls below, meets, exceeds), managers can have actual discussions about performance, employees don’t stress over grades and more flexibility is given managers in terms of rewarding good work with bonuses or raises.

But wait – before you entirely drop the grading system, listen to what research by Gartner shows – employee performance actually drops by 10% when ratings are removed from annual reviews.

The research further demonstrated other unintentional consequences:

  • Managers had difficulty explaining the quality of work to their charges, since there were no specific benchmarks.
  • No longer having to do tedious written reports, the time spent on performance discussions decreased because managers spent that regained time on different projects.
  • Those who did their jobs well and normally would receive glowing performance reviews – and the accompanying compensation – were dissatisfied because managers were unable to explain how the additional pay decisions came about.

To mitigate manager bias and give a more realistic assessment of an employee’s performance, businesses should fold better sources of data into reviews. To provide a more comprehensive picture of how an employee is really performing, SMBs should incorporate better sources of data in their annual reviews. Capterra lists some of those methods:

  • 360-degree feedback, which provides workers valuable insights into their professional strengths and opportunity areas by soliciting feedback from people that work with them regularly.
  • Informal check-ins. Making performance check-ins a regular activity by conducting them monthly or quarterly, employees enjoy improved engagement and managers have more data upon which to base the annual conversations.

Traditional annual performance reports might not be extinct yet, but they are on the endangered species list as better methods of evaluating employees come to life.

 

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