by Bill Sanders, Principal and Sr. Consultant with Roebling Strauss
Time to read: 3 minutes
Several companies have garnered press lately for eliminating the annual review process. Among them are IBM, Accenture, and global accounting firm Crowe Horwath. Here are three reasons you should consider doing the same.
The Annual Review Has Outlived Its Purpose.
For the brief period of history when markets were relatively stable and employees worked at the same company for life and retired with a defined benefit pension, the annual review process made sense. That period is over.
In an era where real time information is available on everything from sales to customer satisfaction, consider for a moment the competitive disadvantage a company would be under if their sales and customer satisfaction numbers were not tallied until 30 days after the close of the month. Consider the disadvantage if the company had to wait 12 months. How could they adjust? How could they actually manage, make decisions, and respond to new competitive threats?
And yet by maintaining annual reviews, we expect employees to wait a year to to be formally told what they are doing well, what they are doing adequately, and what behaviors and results they need to improve upon.
The Annual Review Is Primarily One-Way Communication.
Some of the best versions of the annual performance review do allow space for the employee to provide feedback, critical or otherwise, to their supervisor, but rarely is that feedback considered in the supervisor's review.
In my experience, the more cynical employees view it as an exercise in top-down justification for the meager annual raise and thus not truly reflective of their performance. It is often seen as a necessary exercise with a forgone conclusion.
To truly be effective, performance measurement requires transparency and accountability for everyone.
The Annual Review Isn't Helping Change the Current Atmosphere of Employee Disengagement.
Workforce engagement in the U.S. hovering just over the 30% mark according to the latest Gallup Survey . I doubt the annual performance review is a driving factor of employee disengagement, but it certainly isn't helping.
As noted above, the pace of change in our economy and markets is unprecedented. The resulting volatility drives rapid changes in the market, products, and services. This in turn, drives job descriptions that change seemingly overnight, career paths that are anything but linear, and general anxiety in the workforce.
The most engaged employees are the ones that feel like they are making a real contribution, are increasing their skills, and know that that their contributions are appreciated by their team and supervisor. Confirmation that we are in the right place, doing the right thing, and learning the right skills is the closest thing to predictability that is available. Waiting for the annual performance review for formal appraisal does both the individual and the company a costly disservice.
In Part II next month we'll address things to consider as you choose solutions to replace the Annual Performance Review.
Bill Sanders is Principal and Sr. Consultant with Roebling Strauss, a boutique consultancy that specializes in delivering dramatic improvements in organizational effectiveness: co-founder and Advisory Board Member of Will Someone, software that facilitates and supports team alignment through commitments: and Co-Lead Link of the Finance Circle for Great Work Cultures, a community dedicated to creating a new norm for work cultures that optimize worker effectiveness and human happiness. Connect with Bill on twitter at @technacea.