NAB announces its decision to scrap the annual performance review process as Microsoft, Adobe, Deloitte and Accenture all take the same action, or are in the process of doing so.
Is this really such a good idea? Or is it a case of businesses buying in to the latest management fad? Will we look back in two years and ask, “What were they thinking? Is the performance review really the issue or is the issue those that dispense the dreaded review”?
No one likes annual performance reviews. They are hated equally by employees and supervisors alike.
For many employees, the performance review is a dreaded moment when they feel unappreciated, or when they discover that their key performance indicators are somehow mysteriously changed without being told.
For many, it feels like a beauty parade in which they are artificially compared or ranked against their peers. So instead of encouraging collaboration, it generates a sense in which their workmates are competitors.
For supervisors, reviews are seen as a waste of time, a task that needs to be done as quickly and expeditiously as possible.
For some, they are also uncomfortable moments where that difficult conversation they had been putting off for months is finally confronted or, more usually, avoided again.
Many report they are forced into artificially comparing one employee with others, only to find that the outcome leads to a demoralised team no longer feeling so engaged with the job.
Yet the evidence from many studies across a wide range of industries is that where managers use performance plans, workers do perform better and workplaces are much more productive. So it would seem that performance reviews are in fact good for business.
These two pictures seem hard to reconcile. Why would sensible and successful companies abandon a practice that has otherwise been shown to be effective?
There are several things that come into play.
Firstly, most companies that use annual performance reviews do not do them anywhere near as well as they ought to. Sometimes this is reflective of the policy or system that is in place, but in most cases it’s an issue of poor management or supervisor practice.
Secondly, the dreaded performance reviews are great for jobs where clear targets can be set and where outputs can be counted.
But most employees do what we call “knowledge work”. Most employees today work in service and knowledge-based jobs, in which their performance is driven by their engagement with the job, the group of people they work with, and willingness to add value through creativity and working collaboratively. This requires a very different approach to setting goals and managing performance.
Finally, performance reviews are ineffective when they happen just once a year.
A recently published report in the Harvard Business Review by Marcus Buckingham and Ashley Goodell, on a major survey undertaken by the Deloitte consulting group in the United States, revealed about 70 per cent of all companies surveyed who used performance reviews had or have plans to overhaul their systems.
It also says those businesses innovating their performance review systems and providing their employees with more-frequent reviews – quarterly or even more frequently – outperform those that do not.
Reviews disconnected with reality
So, the problem is not so much with having performance targets, performance plans or conversations about performance, the problem is that it is often done in way that is disconnected from the realities of the business.
The truth is, none of these companies that have announced doing away with “annualised performance reviews” are abandoning the practice of evaluating employee performance or providing staff with a clear understanding on how they should contribute to the organisation.
That would be throwing the baby out with the bathwater.
All the companies that have recently hit the news – and many others that have already headed down this pathway – are in fact reinventing performance planning and reviews.
This new approach is based on coaching and mentoring and recognises that the nature of much of our work has changed – employees don’t just make widgets over and over again.They bring much of themselves to the job – their skills, creativity and attitude.
To harness this, businesses have increasingly understood they have to stop counting widgets and calling it performance.
Many have also recognised that tying a monetary bonus or another form of compensation to the annual review can be counterproductive.
Instead, they have understood that supervisors can motivate and drive employee – and team – performance more effectively through regular interaction with direct reports and discussing progress around specific projects, relationships and the work that needs to be done.
It rests on the understanding that managers can’t pretend to know everything and on some matters, their direct reports are best placed to take the lead. For many managers and leaders, however, the art of enabling and facilitating this type of approach won’t come naturally.
It requires managers and supervisors to develop new skills centred on problem solving and collaboration. So, whether this new push to reinvent performance reviews can fully succeed and do away with the dreaded annual performance review will depend a lot on whether managers are up to the challenge.
The quality of your managers responsible for employee performance may, in the end, provide a greater impediment to effective performance management than the system you have in place.
This article was originally published in The Age.
Read the original article here.