Tom Coens and Mary Jenkins’ Abolishing Performance Appraisals: Why They Backfire and What to Do Instead makes a compelling argument for replacing annual reviews with a more agile performance management framework. Many Fortune 500 companies have already implemented this approach. Instead, they use ongoing feedback loops and OKR goals (Objectives and Key Results) to make performance management an ongoing activity rather than an annual event. We share our summary and key insights here, but be sure to read through the entire book on abolishing performance reviews when you have a chance.
Performance Appraisals Serve a Critical Purpose
The authors explain that we must understand performance appraisals before implementing an alternate approach. Historically, the process has encompassed:
- A rating of work performance and behaviors by someone other than the employee (usually their manager)
- A specific time frame over which the performance is being judged (typically one year)
- The same system used for all team members
- Mandatory participation; must be performed to be eligible for a raise
- Records kept by HR or another person in the company
Appraisals also have distinct purposes, which are to:
- Improve performance so team members and the organization accelerate results
- Coach and guide teams to provide continual motivation
- Facilitate a feedback exchange among team members and managers
- Link pay to performance for a fair and equitable approach to compensation
- Make informed talent management decisions, including layoffs and promotions
- Document performance management data to take a defensible approach to compliance
All of these purposes suggest appraisals play an indispensable role in performance management. If that’s the case, then why are companies like Google and Adobe ousting annual reviews? Deloitte found that nearly 2 million hours went into preparation for performance reviews. Moreover, the Society for Human Resource Management (SHRM) indicates more than 90% of appraisals fail to accomplish precisely what they’re intended to do: improve performance.
Annual Reviews Are Flawed & Ineffective
The authors contend that annual reviews are ineffective because they are based on a series of flawed assumptions:
- One appraisal system suits an entire organization.Flaw: Organizations are made up of unique teams and situations, each of which may require distinct approaches to drive performance.
- Managers alone must oversee employee feedback, performance, and development.Flaw: To promote autonomy, organizations must also invite teams to engage in the feedback exchange, own their personal development, and be held accountable for performance.
- Ratings provide an understanding of where employees rank.Flaw: Judging employees on a numerical scale fails to achieve a comprehensive overview of performance and can lead to demotivation.
- Feedback can be given once per year.Flaw: Feedback must be exchanged on a regular basis. Employees need regular praise, constructive feedback, and clarification of expectations to excel in their roles.
Implement Powerful Ongoing Performance Management Tactics Instead
Ultimately, appraisals are too formal, short-sighted, bad for morale, and worst of all, ineffective for improving performance. Yet, the purposes of appraisals – driving performance, coaching, exchanging feedback, linking pay to performance, making informed talent decisions, and documentation – are still critical to effective performance management. The authors, therefore, suggest taking more empowering approaches to fulfilling these needs:
- Improve performance by using a clear, measurable goal setting approach like OKRs. Make top-level company goals visible to the entire organization and align teams with these priorities. This will improve performance at both the individual and company level.
- Have managers provide ongoing coaching and guidance for teams instead of using ratings and formal evaluations. Use ongoing check-ins (weekly one-on-ones) so managers can communicate with clarity about direction and progress.
- Create an ongoing feedback loop through which managers and teams have meaningful conversations about performance. Train managers on giving clear, actionable feedback to drive employee performance.
- Compensate teams fairly and equitably. Use factors like market data to inform pay decisions but use both extrinsic and intrinsic motivators to strike a balance. Create a line of sight into how teams’ efforts contribute to the progress towards company goals, so they can derive meaning and purpose from their work.
- Provide constructive feedback to coach underperformers. Document performance feedback exchanged during one-on-ones and consider using performance management software to maintain records of communication.
What else? What were some important findings you took away from Abolishing Performance Appraisals?
Do you manage a company or teams (either as a CEO, a senior executive, a middle manager or even a front-line manager)? Do you set and track objectives? Does aligning employee performance to business goals matter, and are you responsible for driving results? If so, please check out a live demo of Atiim OKR & Goals Management Software and we’d love to hear what you think about it. Thank you!