Back to the Future – ditching the annual performance review

In a recent conversation with a global organisation I was slightly horrified to be asked if I could help motivate and educate line managers in preparation for the upcoming round of annual performance management reviews. I was surprised at their use of annual reviews; I haven’t had an annual review since 2012! 

Said company was concerned that managers were not readily engaged or prepared for end of year performance management discussions.

It speaks volumes, managers not engaged or preparing for these important employee reviews, perhaps, I dared to say, the problem is the performance management system and not the managers?

The dwindling use of the annual performance review can be traced back to at least 2002, when Brian Jensen, head of HR at Colourcon announced Colourcon was ditching them. Whilst some might have been appalled at this, Jensen explained that instant feedback tied to employee goals was a more effective way to drive current and future performance.

There are three main drivers to moving away from the annual performance review., Firstly, annual performance reviews focus on holding employees accountable for past behaviour. The process focuses purely on the individual and financially rewards past behaviours rather than looking to improve current and future performance.

Secondly, organisations no longer have clear annual cycles. Projects are often short term, so setting employee objectives for a year seems nonsensical when the business emphasis is on rapid innovation and agility.Organisations have adopted new ways of working to remain innovative and move fast. Agile methodologies, sprints, daily stand ups, scrums – you’ve heard it all. Conversations between employees and managers happen when projects are being scoped, when they start, when problems or milestones occur, and when they finish. If these conversations are an accepted method for monitoring if a team is on track, off track or upskilling, why would it be any different for individual talents and skill development? This new approach supports breaking down silos between learning and performance management.

Finally, the yearly appraisal process encourages individual praise and individual focus possibly to the detriment of the contributions and collaboration needed for team-based work. Whilst there is still an emphasis on an employee’s performance, organisations are encouraging matrixed teams to foster cross-disciplinary problem solving and innovation, meaning that employee’s performance and skill development is not at the expense of a successful team.

In ditching the annual performance review and committing to holding regular conversations, managers can drive the setting of goals, meeting the objectives to accomplish those goals, and adjust as necessary along the way.. Conversations are more holistic, and all focused back on the future.