“Once a year [I] share with you what I think of you. That doesn’t make any sense. People want to know . . . am I doing all right? Nobody’s going to wait for an annual cycle to get that feedback,” Accenture CEO Pierre Nanterme told the Washington Post last week.

And with these words Accenture’s 330,000 employees breathe a hefty sigh of relief. No more annual reviews. No more excruciating performance appraisals.

And thank goodness. Because the notion that you can manage performance through an annual conversation is as absurd as imagining you can manage your marriage through your anniversary. No wonder that the annual appraisal has become to recruiters what Christmas is to divorce lawyers.

While a fresh approach to performance management can re-engerise, re-engage and even make headlines, it’s akin to launching a flashy employee home page or unveiling a shiny cappuccino machine in the office kitchen. The excitement is pretty short-lived because the key to increasing employee performance doesn’t lie in a system. It lies in understanding the psychology of human behaviour, understanding how to get the best from people.

Over 100 years ago, two psychologists Robert Mearns Yerkes and John Dillingham Dodson developed a model for looking at what gets us to perform at our best. On the x-axis they placed ‘arousal’ (sometimes renamed ‘stress’ by modern studies but actually closer to a sense of challenge), and on the y-axis, ‘performance’.

As levels of arousal rise, so does performance, but only to a point. When we take on more than we can handle our performance starts to falter. As one might expect, an organisation’s star players can deal with higher levels of arousal before they feel overstretched, meaning they reach a higher optimum performance. But even they aren’t immune to the performance drop-off.

The key then, is not only to help more employees become high performers but to help them sustain their optimum levels for longer, even when things start to get really tough.

Talk every day, not once a year

One of the most popular explanations for ineffective performance management is the reluctance of managers to have tough conversations. This is hardly surprising. Telling someone that what they’re doing isn’t good enough challenges a number of fairly universal human desires, e.g., being liked, not upsetting other people, feeling in control. It’s no wonder most of us would rather steer clear.

A lasting legacy of soul-destroying appraisal cycles is that managers tend to have a negative association with perfectly sensible activities like giving accurate feedback and providing balanced career advice.

We need to encourage managers to talk about everyday topics, every day. This is both natural and easy, which means that the conversations are much more likely to happen. This, in turn, greatly increases the chance of creating a mutually respectful and considerate relationship, and having regular, informal, high-quality dialogue. It also greatly reduces the risk of a tricky year end appraisal.

If you are regularly taking notice and giving someone descriptive feedback on what they are doing then the annual review is little more than a chance to celebrate and take stock. You might even look forward to it.

Goals that stretch not strain

We have all experienced the endless chasing emails from HR about entering goals in to a system. We log in once, laboriously enter our objectives, and never revisit. The task of setting goals has become negative, and this needs to be redressed immediately because smart goal setting is a vital part of a high performance culture.

Goals can harness ambition, a sense of purpose, and a clarity of focus which is so often is missing in today’s hectic, ever-changing workplace. Their power has been proven by a multitude of research, perhaps the most compelling of which was Locke and Latham’s 1984 study of American Pulpwood Association loggers.

It found that loggers who were given specific, challenging goals immediately and dramatically outperformed those who were told to simply ‘do their best’.

But knowing what is expected of us is only a part of the solution. Managers can build a sense of challenge into employees’ goals by making sure they are:

1. Just out of reach – individuals believe they can achieve success, but aren’t yet sure how they’ll do it.
2. Aligned – to both an individual’s personal strengths and motivations, and to the organisation’s strategy and goals.
3. Always up for review – the world around us changes fast and so our goals may need refreshing too.

In a 6-year study of 229 entrepreneur CEOs and 105 associates, psychologists J. Robert Baum and Edwin A. Locke found that business growth was driven by giving employees stretching goals but also, crucially, by helping them believe that they could achieve them. Dialogue is the best way to do this.

By addressing some key questions together – ‘What is realistic? What resources are available? Can we streamline the process?’ – managers come to understand what constitutes a stretching challenge for the employee, while the employee is reassured that they have the skills, resources and support needed to achieve it even if they haven’t yet worked out the finer details. And even if it’s going to be a bit of a slog.

Aligning these goals with the company’s goals will also yield higher performance by creating a clear line of sight for employees between their contribution and the difference they are making to the wider organisation.

SuccessFactors and the Workforce Intelligence Unit studied 40 organisations, and found that high performing companies are much more likely to align their employees’ goals with the company goals. This practice was present in 46% of the study’s high performing companies and only 18% of weaker performing companies.

Finally, we come to reviewing goals, and some powerful research from Bersin and Associates, now Bersin by Deloitte.

Their survey of 214 business leaders and HR professionals found that of those companies that reviewed goals each month, 50% were also in the top quartile in terms of performance, while only 24% of companies who reviewed goals once a year made it into the same bracket.

Of course, the optimum time between goal review sessions will be different for different types of team and different types of role. In a sales job, for example, you don’t want the goalposts moved every month. In a project-based job you don’t want your goals fixed for the whole year ahead.

The trick for managers is to remain agile and flexible, ready to spot and adjust quickly to what will yield the greatest performance for their people.

We’ll continue to be surprised (and perhaps delighted) with news of global businesses reinventing their performance system or doing away with it altogether. But it’s important we don’t miss the main point amidst the headlines: we must treat people as people, not as a process. And to get the best from them the key lies in understanding the science of human behaviour.