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Goodbye Annual Performance Review, Hello Performance Development
Thursday, February 18, 2016
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Employees and employers alike are increasingly frustrated with traditional performance management. In fact, performance reviews are the second-most disliked work activity by managers after firing employees, according to 2015 data from the Human Capital Institute (HCI). The problem, according to a new UNC Executive Development white paper, “Transforming the Traditional Performance Review Process,” is that annual performance reviews home in on an employee’s past performance rather than focus on how to develop and promote better future performance. 

Kimberly Schaufenbuel, program director of UNC Executive Development, explains that traditional performance management processes are viewed by many HR professionals and leaders as a “high effort, low return, check-box activity.”   

HCI research finds that less than one-third of HR professionals were satisfied with their organization’s performance management process, and only 35 percent of survey respondents trusted their employee ratings to be an accurate reflection of actual performance. What’s more, HCI survey reports that only 27 percent of survey respondents thought their performance management process was effective in developing their employees’ knowledge, skills, and abilities. 

The traditional performance review process is “rooted in a tradition that does not reflect how work gets done today,” writes Schaufenbuel. However, today’s work requires goal cycles as short as a month or a week, but the traditional performance review process remains based on a 12-month cycle. 

In addition, annual reviews typically focus on individual work and fail to take into account that organizations are increasingly working in teams and emphasizing collaboration. The UNC report describes how performance review processes based on rankings and ratings “are a poor fit in these synergistic working environments because they encourage competition and discourage collaboration among team members.”   

Finally, the report describes how current performance management approaches are typically more costly and cumbersome. When management consulting firm Deloitte reassessed its performance management approach, Deloitte found performance reviews took an average of 28 hours per employee, with most of that time falling on senior leaders in the firm. 

Here’s the good news: Research by Bersin by Deloitte found that about 70 percent of organizations are reconsidering their performance management strategies. There are three ways employers are revamping performance reviews: 

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  • Eliminating the annual performance review altogether in favor of more regular, real-time feedback.

  • Removing rating systems that cause competition among employees.

  • Revamping compensation systems to more personally reward employees. 

Senior talent development leaders seeking to update their performance management practices can follow the example of several prominent organizations: 

  • The Gas has replaced their annual performance reviews with monthly coaching sessions between employees and managers.

  • General Electric (GE) has taken advantage of technology by using a performance tracking mobile app that allows employees to make text or audio notes.

  • Adobe has introduced “Check In,” a new performance management system that allows managers to give informal, on-going, real-time feedback to employees.

  • Deloitte has started to review employee performance using a five-point scale or by answering yes or no to four straightforward statements at the close of every project. 

“New performance appraisal approaches look forward, not backward,” says Schaufenbuel. “The approaches also allow people to learn from their mistakes and grow because they are based on the belief that talent can—and should—be developed.” 
For more insight, check out the full report, “Transforming the Traditional Performance Review Process.” 

About the Author

Ryann K. Ellis is an editor for the Association of Talent Development (ATD). She has been covering workplace learning and performance for ATD (formerly the American Society for Training & Development) since 1995. She currently manages ATD's Community of Practice blogs, as well as ATD's government-focused magazine, The Public Manager. Contact her at rellis@td.org. 

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