Employee appraisals, performance reviews, or the year-end appraisal… whatever you call it, the concept is pretty much the same. It’s a process designed to evaluate and measure an employee’s performance - to identify room for improvement, highlight areas of success, and to generally check on how they are getting on.
In theory, there are benefits for everyone involved. First off, the employer gets to see how everyone at their company is performing. For the employee, it’s a chance to see if they are delivering what is expected of them, and learn how they could improve.
There’s just one problem.
Traditional performance reviews aren’t working. They are broken - simple as that.
A few years ago, a global study run by Willis Towers Watson found that less than half employees felt that their performance appraisals were effective. Similarly, the business consultancy Gallup claims that only 2 out of 10 surveyed employees felt that their performance was managed in a way that allowed them to do outstanding work.
For HR professionals, that’s a particularly damning number. Creating an environment that helps their team to do their best work should be a leading priority. And yet a massive 80% of employees feel that their performance reviews are not helping them to do that.
So what’s gone wrong? And more importantly, how do we fix it?
Traditional performance reviews - ‘the old way’
Traditional performance reviews have generally been run in a fairly standardised manner. Usually, they’re run once per a year. And while the exact structure might vary company to company, normally they are roughly similar. We’re looking at a process a bit like this:
- Peer feedback
- Manager evaluation
- Calibration of that scoring
- Pay/bonus negotiation
- Appraisal meetings
That list all looks pretty reasonable, right? So what’s the problem?
1. The feedback cycle is long. Way too long.
Running performance reviews once or even twice a year is an incredibly ponderous and slow-moving method for checking up on your employees. It creates huge swathes of time where feedback and self-reflection is not a priority - just something to be dealt with at the end of the year.
Imagine making the same mistakes, every day, for a whole year before someone told you that you’d been doing it wrong. It’s both terribly inefficient - but also extremely demoralising for employees.
On the flip-side of the coin - the faster that you can deliver feedback, the more valuable and impactful it is.
2. It’s unbelievably time-consuming
As you might imagine, compressing a year’s worth of evaluation and feedback into a single interaction is an absolute nightmare.
Running your reviews in this way means comprehensively documenting your assessment of an employee’s work over the course of an entire year - a process you’ll have to maintain for every single employee at your company.
3. Assessing personal development only once a year is hopelessly ineffective
A focus on personal development is a really key feature of any good appraisal system. They are crucial for keeping your employees engaged in their work, and to encourage them to grow within their role.
But setting and assessing those goals once per year is a hopeless endeavour. Just look at the vast majority of New Year’s Resolutions - set with all the goodwill in the world, and forgotten by mid-January.
If you want to help your employees make positive changes to their performance, then it takes more regular input than this. You need to make personal development a central part of your employee’s working life.
4. It’s incredibly unpleasant for everyone involved
One side effect of running performance reviews once per year is that process tends to crystallise into a ‘review season’. It becomes a stressful, anxious month at the year-end, where everyone is on edge, and no one in the company gets any real work done.
On one side, employees feel that the assessment of their entire year swings on a single conversation.
On the other side of the table, managers are as equally unhappy. Not only does the system create a huge backlog of work, but they need to have interview after interview with staff members who are perhaps already on edge, discussing projects that could have happened up to a year in the past.
So… the performance review is a zombie
The annual appraisal is dead. And yet it is still very much alive. There is a pretty widespread understanding it doesn’t work - but no clear-cut answers on how to fix it.
So, the old way lives on - even after death.
While we may not have a direct, like-for-like replacement, the last few years have seen a great many companies exploring new ways of running their review systems.
They are all versions of what we can broadly call continuous performance management.
In the next section of this article, we’re going to take a closer look at continuous performance management, and explain exactly why it is the best way of running your staff appraisals.
What is continuous performance management?
1. It includes continual performance ratings
The clue is in the name. Instead of the once-per-year annual review, employees should have regular check-ins and touch-points with their managers. Feedback shouldn’t be a yearly event but rather an integral part of an employee’s day-to-day.
General Electric have been the trailblazers here, creating their own app that helps employees and managers maintain a constant dialogue with each other.
Meanwhile, employees at Bridgewater Associates, the world’s largest hedge fund, use an iPad app called Dots to rate each other on 100 attributes in real-time.
We are by no means saying that you need to go out and have your own app built - there are plenty of more lo-fi options available to you. Adobe have pursued the same goal via their Check-In system - a casual, yet regular conversation between employees and managers to keep abreast of performance over the course of the year.
Takeaway: Talk to your team regularly about their performance, and deliver feedback as and when it’s needed.
2. Feedback is 360˚
Continuous performance management isn’t reliant on top-down input from managers like the traditional appraisal system. after all - management is a continual process.
Instead, feedback is encouraged from every direction. This includes sideways - from peers and colleagues - as well as upwards, where team members give feedback on their boss’s performance. (Remember that Bridgewater Associates app? CEO Ray Dalio recalls receiving a 3/10 score from a 24-year old new hire - and welcomes it).
The major advantage of this approach is that it encourages a much fuller picture of everyone’s performance. High-level managers, particularly CEOs, can often have a very ‘gappy’ impression of who is doing what in their company - for the very simple reason that they can’t see everything.
Takeaway: Draw on the experiences of everyone at your company - you’ll get a much more accurate picture of who your star performers really are.
3. It makes personal development a priority...
Traditional performance reviews have often included a token aspect of personal development - but it has regularly overlooked just how powerful a tool it can be, for both the employee and the employer.
Here’s the trick:
If you can identify what your employee wants to achieve in their professional lives, then you can agree together on how they can achieve that within the scopes of the business.
Help your employees invest themselves in their job, and you’ll see them approach everything they do with a renewed sense of purpose. They’ll feel happier, more engaged, and the quality of their work will benefit too.
Takeaway: Help your employees engage with their work on a personal level - not just a professional one - and reap the benefits together.
4. ...and it makes personal development second nature
When you really break it down, the reason that employee reviews exist is to try and improve your team’s performance. Traditionally, that has meant managers telling an employee where they should be improving.
But the end goal is really to take the managers out of the equation altogether - for employees to be self-reflective about their performance, and identify their strengths and weaknesses independently.
Achieve this, and the hard work is already done. If employees are taking ownership of their performance at work, they will become better by themselves.
Takeaway: Encourage your team to be self-reflective about their work - they know their own performance better than anyone else.
Turning theory into action
In this article, we’ve been mainly been talking theories. We’ve dug deep into why traditional appraisals have failed, and we’ve examined the emerging trend of continuous performance management that has begun to replace it.
How you want to deliver on these ideas is up to you.
It depends on you, your team, and how you want your company to work. There isn’t one right way.
This is why we have built Charlie Reviews. With this feature, you have the flexible framework you need to deliver an excellent review system, exactly how you want it. Featuring automated scheduling, you can ensure that every check-in or probation meeting happens at the right time, while our customisable templates gives you full control over how your reviews are delivered.
What’s more - we allow you to fully automate your review process, so you can ensure that meaningful conversations take place across your company, effortlessly.
It’s continuous performance management - set up once.
To find out more about how to tackle underperfomance issues in a way that's both compliant and fair on your team members, download our free guide.