An Alternative to the Annual Performance Appraisal

The Issue with the Traditional Annual Performance Review Process

As we end the month of January, many organizations are in the midst of conducting annual performance reviews, a process that can be stressful for both managers and employees. One of the biggest issues with performance appraisals as they have traditionally been conducted in many organizations is they are backward-looking. Furthermore, many organizations focus mainly – or sometimes, only – on results that may not be entirely within the control of the employee. Annual performance appraisals are often filled with untimely, incomplete, and sometimes false narratives about the individual in question.

As stated by Marcus Buckingham in Episode 77 of The Hennessy Report, performance appraisals are by nature subjective, as suggested by the term “appraisal.” One manager’s view of an employee is limited to what that manager has observed. Furthermore, these observations are likely incomplete and, sometimes, even incorrect. Ratings can also reflect the managers own feelings and/or views of themselves. Oftentimes this is not intentional on the manager’s part but is done subconsciously and is not avoidable. As such, rating employees may not work as intended.

How Can Organizations Improve the Review Process?

By nature, performance reviews are intended to provide employees with feedback on their performance and accomplishments for the year, while also helping the employee identify areas where there is room for improvement and establish goals for future career growth and development. However, according to Gallup, only 14% of employees strongly agree their performance reviews inspire them to improve.

Appraisal Process vs. Developmental Process

So, how can an organization improve this process? Communication, communication, communication! Organizations could shift from an appraisal process to a developmental process, which would encourage and reward managers to have frequent one-on-one performance conversations and light-touch check ins on a weekly basis. By having these conversations every week, managers would be able to provide frequent, short-term attention about each individual and their work on a regular basis.

Managers can prepare for these conversations by taking a value-based view of achievements, misses, strengths, possible career derailers, brand/reputation, future needs for the role, and individual development needed for success. By having these conversations regularly, managers can also set the stage for career development conversations beyond the current role.

Helping employees prepare for the conversations will also ensure both parties are able to share their views without the nervousness or anxiety that employees can sometimes experience during review period.

Separating Development and Compensation Discussions

Another improvement that needs to be made is to separate these frequent development conversations from the performance compensation discussion. If the compensation decision is to be announced at the end of the performance discussion, the employee is not hearing anything that is said because they are waiting for the “shoe to drop”. If it is announced at the beginning, emotions are high (either good or bad) and nothing else is heard. Either way you slice it, chance are the employee is not actually hearing and digesting the feedback that you are providing that is important to their continued success with the organization.

There could be many factors that go into making a compensation decision that have nothing to do with individual performance, such as the compensation structure, which might prevent a manager from rewarding an employee because they are at the top of their grade. Other factors that are not within the control of the employee include:

  • Lack of managerial or team support
  • Financial state of the firm
  • Stress generated by a toxic culture

Additional Reasons to Implement a Frequent, Development-Focused Approach to Performance Management

Another benefit of holding frequent development discussions in lieu of annual performance appraisals is that it allows the manager to focus on the employees’ growth with specific, job-related skills, continued learning, and interpersonal skills, and discuss how those factors will contribute to the employee’s growth. Results speak for themselves and, therefore, don’t need to be appraised or graded. In the best-case scenario, goals should be set and jobs designed so that employees know on a daily basis whether they are achieving the necessary results.

Finally, shifting the focus to growth and development opens the door for inviting suggestions from the employee as to how things could be done better. People become committed to things they help create.

Shifting annual performance appraisal conversations to frequent developmental conversations would allow everyone in the organization to focus on the future and seek creative ways to accomplish both individual and organizational goals.

Interested in learning more? For more than 40 years, Keystone Partners has been working with organizations with their career and talent management-related needs. Contact us today to learn how we can help your organization realize the full potential of your people.

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