What Happens When Companies Eliminate Annual Performance Reviews?
Good news for the haters of performance reviews: many businesses are deciding it’s time to do away with performance reviews and ratings systems altogether. Recently, companies like Accenture and Deloitte have made headlines for deciding to move away from annual performance reviews and ratings.
Instead of looking backwards and reflecting on an entire year’s worth of work — and in Deloitte’s case, allotting two million hours to conduct the reviews — these companies are going with a new performance appraisal model. Which is a good thing, particularly since a recent survey from Deloitte uncovered that only 8% of organizations believe the traditional review process is a productive one that adds value.
Thinking about whether your business should follow suit? The Harvard Business Review recently interviewed representatives from 33 companies that have axed traditional performance reviews. Here is some of what they found:
1. There are more conversations in a post-review world
Do away with reviews, and managers and team members are likely to start talking on a regular basis. Whereas in the past, managers would be happy charting progress once a year. In a post-review world, these same folks are meeting with their workers on a quarterly basis. It’s up to managers themselves to determine which employees may need more coaching.
2. And the conversations are forward-looking
In the annual performance review world, managers, and employees might talk about a project that was wrapped up 11 months ago. In the post-review world, these folks talk about the future (e.g., goals, growth, and development) when they meet. Seems like it makes more sense, doesn’t it?
3. Admin responsibilities were significantly reduced
Managers aren’t hired because they’re great at filling out worksheets and taking notes. They’re hired because they know how to lead and deliver results. When businesses stop holding performance reviews, managers have less documentation to fill out. They then have more time to focus on the big picture.
4. Businesses still need to compensate their employees
Just because performance reviews are trending downward doesn’t mean raises are going the way of the dodo too. Differing compensation is alive and well in the post-review world. Because managers don’t have to spend time filling out documents (see #3), they can spend more time collaborating with their employees on goals. That way, raises and bonuses are determined by tangible metrics instead of ambiguous stars.
5. Patience is a virtue
You can’t just get rid of performance reviews overnight. Organizations that switched systems too quickly ended up regretting it — no surprise there. By doing your due diligence and taking the time to craft a thorough, sensible plan, you increase the likelihood your post-review transition is as smooth as possible.
So what do you think? Is it time to say goodbye to annual performance reviews at your organization?