• 24 July 2015

Why top companies are doing away with annual performance reviews

Today’s markets are competitive. To keep up with and overtake the competition, you have to have not only a great product, but a capable and energised team eager to go to bat for you. The need to attract and retain the very best people for the job has companies large and small taking another look at how they relate to employees and their wellbeing. Employee engagement, job satisfaction, and manager-employee communication are at the forefront of HR innovation, and for good reason. A lot of the practices that traditional companies have relied on for decades are proving a poor fit for the modern workplace.

Recently FindMyShift,com, a company that helps businesses take advantage of cloud capabilities to manage their workforce, took a closer look at one of the time-honored practices of human resource management: the annual employee performance review. What they discovered may come as no surprise to any employee who’s ever had to endure once of these reviews, but it should have upper management and HR departments alike thinking about best practices for getting the most out of the folks who keep their business running.

FindMyShift’s infographic provides a pretty handy breakdown of just how much annual performance reviews don’t work and what’s gone wrong with them. According to their research, the Society for Human Resource Management has reported that a whopping 90% of employees find performance reviews in their current form not only ineffective, but painful. What’s more, 58% of managers themselves think these reviews are essentially a waste of time - and an unpleasant one at that.

FindMyShift suggests that the strong aversion on the parts of both managers and the managed results from a number of factors, most of them inherent qualities of such reviews: they are too infrequent to effect any kind of real change or reflect existing realities; formats are too generic and generalised to provide relevant feedback; reviews are too biased and subjective; and the often direct relationship between review scores and promotion or pay increases creates an undue amount of stress around them. The list goes on.

So what is a manager to do? Well, there are a number of alternatives to rote performance reviews that pioneering companies are starting to explore. The infographic highlights a few approaches that seem to be having a positive effect. Some of these include providing immediate rather than delayed or accumulated feedback, focusing on professional development and growth rather than highlighting weaknesses or missteps, and giving balanced attention to positive recognition and necessary correction, among others. 

A mix of employee-centered approaches in place of the top-down, bottom-line focused programmes that have dominated company practice for so long leaves employees feeling valued and supported instead of threatened or brow-beaten. They are, as a result, more likely to be engaged and loyal to the company, give their best performance more of the time, and have better relationships with managers and supervisors. This kind of feedback encourages collaboration that can generate new ideas, open channels for the freer flow of valuable information in all directions, and create a more pleasant and productive work environment.

Today’s workforce expects a supportive and encouraging work environment. Businesses cannot afford to lose top talent because of an attachment to outdated and ineffective HR practices.