The Performance Review Trend You Need to Jump On Now
As everyone who works in a traditional work environment knows, the vast majority of companies evaluate employee performance using a yearly review. However, some big-name organizations are choosing to nix the annual review, starting a trend of finding a new, more effective way to assess their workers. It seems these companies are paying attention to the statistics.
According to The Wall Street Journal:
- 99% of companies use yearly or twice-yearly performance appraisals
- About 60% of HR executives grade their performance appraisal systems a C or below
- Two-thirds of performance appraisals had zero or negative effects on employee performance post-feedback
- An examination of 17 firms without formal performance appraisal systems reported low turnover, high employee morale, and strong relationships between managers and employees
The data shows that not only do annual performance reviews not work, but they can actually do harm to employee performance — not to mention employee-manager relationships. We can delve deeper into the statistics there.
- One-fifth of employees felt they had an unfair appraisal
- 90% of HR professionals don’t believe their companies’ performance appraisals provide accurate information
- 44% of employees surveyed didn’t think their boss was honest during performance reviews
It’s not hard to see how these feelings can easily build resentment in the workplace. Recently, one of the largest companies in the world, Accenture, took stats like these to heart and has decided to make the leap and ditch the annual review.
Accenture’s Big Move to Lose Annual Performance Reviews
Accenture is a professional services firm that has around 330,000 employees working all over the globe. Changing their review tactics is revolutionary and could inspire a lot of other large companies. CEO Pierre Nanterme talked to The Washington Post about his company’s decision.
“Imagine, for a company of 330,000 people, changing the performance management process — it’s huge,” he said. “We’re going to get rid of probably 90% of what we did in the past.”
In place of the traditional yearly review, Accenture will implement a more “fluid” review system. Employees will receive ongoing, timely feedback from their managers in real time, alongside any assignments or projects. It fits with survey results from TINYpulse on how often employees would like feedback: 64% of employees surveyed said they wanted their supervisor to check in with them at least every two weeks.
Accenture’s decision is a game changer, but the company isn’t the only one to do it. At this point, according to The Washington Post, 6% of Fortune 500 companies have gotten rid of rankings — and that number will probably only go up as the data becomes more widespread.
Let’s look at another seven successful companies that have nixed the annual review.
- Deloitte: Like Accenture, major consulting and accounting firm Deloitte announced that it was opting for a “nimbler, real-time” performance review system, according to The Washington Post and Financial Review. Deloitte had worked under a biannual performance review plan, but by June 2016, it plans to reinvent the entire company’s review process. No longer will Deloitte employees work under ratings and distribution curves. Instead, the company hopes to use much shorter questionnaires — four questions each, two of which only require a yes or no answer.
- Microsoft: Microsoft bucked tradition two years ago as one of the early opponents of yearly reviews. It was a big move, considering the company had previously spoken up about the merits of judging employees against each other in its “stack rankings.” The rigid, competitive system was notoriously hated.
- Adobe Systems: Adobe went one step further and ditched performance evaluations all around in 2014. Donna Morris, head of the company’s HR department, told Human Resources Executive that under the traditional review system, its employees were “stuck in a time warp.” Adobe noticed that there was a spike of employees leaving the company immediately after the annual reviews, and that it cost them time and money. By losing the appraisals, Adobe was able to build better relationships with its employees and save them from the yearly exodus.
- Gap, Inc: At the Gap, managers saw that performance management seemed “threatening” to employees. Now, instead of the traditional processes, Gap managers work under a system called “Grow, Perform, Succeed.” In this system, managers have monthly conversations with their employees in a less formal setting. It’s treated as a conversation rather than as a strict, ranked evaluation.
- Juniper Networks: Juniper hasn’t given formal ratings or reviews since 2011. The company ditched employee rankings and doesn’t keep documentation of any ratings or evaluations. Instead, Juniper works under a “structured conversation” model, focusing on quality conversations between employees and managers — and on these “Conversation Days,” more than 88% of participants reported that their conversations were “helpful” or “very helpful,” and the majority of employees said it pushed them to perform better, according to Strategy+Business.
- Expedia: Expedia used to have a 5-point rating system to evaluate and rank its employees yearly. Now, in an effort to “rehumanize” the system and the relationship between employees and managers, the company ditched the rankings and its “event-oriented” evaluations. Instead, they stopped assigning employees grades and now have a more engaging dialogue between employees and their manager on how to move forward together successfully.
- Motorola: Motorola got rid of its performance appraisals that assigned labels to employees — “valued,” “excellent,” “outstanding,” etc. — and doled out bonuses according to each label. The company found that the criteria for each designation was confusing, and that it lead to resentment among employees because it was so closely tied to monetary rewards. Now, instead of focusing on ratings, the focus is on performance — where it was supposed to be in the first place. There are ongoing employee-manager conversations about performance in place, but they aren’t tied to salary or bonuses.
As more companies decide to ditch traditional annual performance reviews — especially the high-profile companies — the benefits of the change will become even clearer.