Annual performance appraisals have come under the microscope in the past couple of years.
We have seen major companies publicly state that the traditional annual appraisal process – where information is shared once-a-year about how well an employee performed.
This kind of ranking system and documentation process is no longer working. As a result, there has been a shift in thinking about the purpose and overall value of annual appraisals. According to research firm Bersin by Deloitte, 70 per cent of companies are now reconsidering their performance management strategy.
Writing in the Harvard Business Review, NeuroLeadership Institute researchers David Rock and Beth Jones, suggest companies that remove end of year performance ratings are seeing the conversations shift from justifying past performance to thinking about growth and development. The result is better employee development, which seems to be a win for everyone.
This represents a shift in how talent is managed and how performance is measured. When performance management becomes part of an organisation’s unique rhythm, the process becomes more personal and flexible.
Annual performance reviews are failing
Too often annual reviews focus on recent performance and not on competencies and achievements demonstrated throughout the year. Moreover, annual reviews often run separate from the business and use different processes, systems and tools. So what is the alternative to annual appraisals? What should HR professionals and line managers consider?
Here are five ways organisations can get the most out of its talent by making performance management more ongoing, engaging and strategic:
- Set regular goals collaboratively. Organisations that review performance at least quarterly are 50 per cent more likely to report above-average customer satisfaction scores and 65 per cent more likely to be effective at controlling costs than organisations that revise goals only once a year. The key is for managers and employees to set individual commitments together. Managers can help employees line up personal commitments to business goals, and adjust priorities along the way or as business needs change. An ongoing dialogue about how employees are progressing towards meeting the commitments they set also provides them with a deeper understanding of how their work matters, which is important for employee engagement.
- Gather feedback from multiple sources. Soliciting feedback about an employee from colleagues, such as other department managers, co-workers, direct reports and partner stakeholders, is a great way to get a more rounded view on an employee’s performance. This approach works well where an employee may report to different people throughout the year in more flexible, agile organisations. 360-degree feedback forms should be tailored to different types of employees – frontline employees or in leaders, so relevant competencies can be evaluated and assessed.
- Have development conversations. Organisations can increase retention rates and attract top talent by promoting personal development and career progression. It is important to be mindful of the motivations and challenges faced by different generations of employees and adapt to their individual needs. Development plans and activities such as training and mentoring should be linked to the ways they will help the business achieve success, in addition to aligning directly to individual competencies and supporting career aspirations.
- Start using check-ins. Regular check-ins where communication is two-way and honest provides managers and employees with an opportunity to look at how progress is being made on achieving commitments. Managers can provide feedback and coach employees during these check-ins, which can be formal or informal. Check-ins are a great way to voice thoughts and challenges, which can build trust and engagement levels. Managers should aim to check in weekly or monthly at the very least and prepare specific open-question conversation starters to help get the dialogue going, such as “What is the most important thing we should be talking about?” or “How best can I support you?”
- Take a project view. Matrix-style organisations have been around for some time and enable employees to work with different departments and project leads. To best evaluate employee performance within project-based assignments, managers can consider employing a system of collecting feedback as a project progresses. That way, managers can have a summary review of all the feedback gathered during different phases of the assignment about how an employee did, and reference this information during follow up conversations about performance management conversations once the project has ended.
Annual appraisals are one-off opportunity to discuss development needs. The old way about thinking about annual appraisals is over. To get the most out of its talent, organisations need to have tools and resources to improve employee performance at every opportunity, not just once a year. Information about employee performance can then help lead discussions about performance and inform development plans.
If organisations can make performance management a regular and natural part of their unique business rhythm, they will be well placed to get the most out of the talent it has to help achieve success.
Dominique Jones is Chief People Officer at Halogen Software. She holds a Chartered Institute of Personnel and Development Certification. For further information visit .