This is a guest post from Dan Halston on behalf of Money Crashers.
Annual performance reviews are going the way of the dodo bird.
Rewind a few years and any respected company was putting their employees through the dreaded paces of the annual review. In lots of companies, it not only includes an assessment from the boss but also inputs from colleagues and the employee. A funny thing has been happening in recent years, though: a handful of companies, including high profile ones like General Electric and Accenture, are giving up on the annual review. For some, it’s a dollars and cents thing while for others it’s viewed as a big waste of time. After all, it often ends up hurting morale and productivity more often than it motivates employees.
While there are still many holdouts that balk at the notion of abandoning the annual performance review, there are a ton of reasons why it can hurt productivity more than help.
The whole idea behind the performance review is to give employees an assessment of their strengths, weaknesses, and goals for the coming year. It may seem like an effective way to keep workers abreast of how they are doing as well as motivate them for the year to come, but that is often not the case.
For starters, performance is tied to a lot of things outside the control of the employee, including the economy and how that particular business is doing. Not to mention that a lot of the annual review is skewed toward what the worker can do next year and little in the way of feedback.
But it’s not just a lack of input from the employer to the employee that makes performance reviews pointless. With future goals the main focus, employers never get to hear from their subordinates how they are doing on the communications front or leading the group, which ultimately hurts the performance of the entire business. Not to mention that if the goals from the ending year have not been met, it could leave the employee worried about his or her job and thus looking elsewhere. That could spell disaster for certain companies who are in an outright war for top talent. Fortunately, businesses are realizing the inefficiency of performance reviews and are now looking and implementing new practices to boost their employees’ productivity.
A big component of the annual review and one that many employees despise is the self-assessment. That’s where the company asks each employee to rate themselves and provide a list of achievements for the year. The goal is to see if the employee and manager are on the same page, but it can often be skewed because who is going to give themselves a bad review? Supporters of the self-assessment argue that it forces employees to think about their achievements all year and provides a way to sell themselves to the higher-ups, but for many, it seems like a big waste of time.
For overworked employees who don’t have time for a life outside the office, let alone to assess themselves, they don’t see the value in spending time going over their accomplishments for the year. After all, wouldn’t a good manager already know them? On the flip side, the boss doing the review will often defer to what the employee said. That makes the annual review even more meaningless if there isn’t any honest feedback to go around.
Performance reviews in and of themselves may not be too expensive if the company uses a bare bones review process. But in the technology-driven world we live in, there’s a big business in selling companies performance review software which costs money. Then there are the information technology costs of implementing and maintaining that software and the expenses of human resources to plan and execute on the annual review.
All of that doesn’t take into account any time lost in productivity spent by the manager and employees filling out the annual review and having a meeting to discuss it. According to management consulting firm DecisionWise, the cost for an annual performance review is $120,000 just based on the value of time. For a company with 5,000 workers, that swells to $1.2 million.
For a lot of companies, the annual review is a one-off thing, not something that is tracked throughout the year. For enterprises that fall into that category, it’s even more costly because it doesn’t yield any good results. According to DecisionWise, many organizations track participation rates and completion of the review but not the actual impact from it.
One of the last things a company wants to create is an environment of uncertainty. And unfortunately, the performance review can do exactly that. Leading up to the annual exercise in assessment, employees are often wondering if they did the right things during the year, if they will get a good review from the boss and what about any impact it will have on their raise?
Once the performance review is completed, they then have to worry about what the boss will say during their one-on-one meeting. All of that not only lowers productivity but it can also hurt morale. And a demoralized employee, even if he or she shouldn’t be, could start looking for employment elsewhere, which isn’t the intended goal of the annual review. Then there’s the reaction of employees to feedback.
Many people can’t take criticism, even if it’s constructive, and will push back on the results of their reviews. That can create an acrimonious relationship between the worker and his or her boss, creating tension and potentially hurting the morale of co-workers. That’s not to say Companies shouldn’t be afraid to give feedback, but waiting until the end of the year isn’t the ideal time. A good manager is always providing their employees with helpful tips and support, not holding it all in for the last month of the year.
At the end of the day, one of the biggest reasons why companies should forgo the performance review altogether is that everyone hates it, except maybe human resources and upper management. Employees dread doing it, managers typically feel the same way, particularly since they are the ones that have to spend the most time writing them up. As companies look for ways to retain their employees, throwing away the performance review and providing feedback all the time, fostering an open door policy between management and those that report to them can go a much longer way in improving performance than the annual review.
The annual performance review has been a rite of passage for countless employees around the globe, for decades. More recently, companies are abandoning it, realizing that it is costly and more often than not, ineffectual. The self-assessment portion of it typically leads to glowing reviews, while feedback from the boss often gets buried under goals for the next year. Not to mention that it can cost a company a pretty penny and not yield them many, if any positive results. All the while stressing out workers during a very stressful time of year.
A better choice, one that lots of companies are starting to embrace, is giving feedback in real time, when it’s called for, instead of waiting until the end of the year to pipe up.
This is a guest post from Dan Halston on behalf of Money Crashers. Dan Halston used to be a performance review consultant, hired by Fortune 100 and Fortune 500 companies to help them implement their performance reviews—that is, until he began focusing on creating healthier company culture instead.
Thanks to Pixabay for the image.