There seems to be a trend developing among many employers of eliminating annual performance reviews altogether, and instead relying on more continuous feedback throughout the year.
The Washington Post recently reported that studies have shown up to 10 percent of Fortune 500 employers have eliminated the annual performance review process, and that many more are likely to follow. The theory is that ongoing feedback on a quarterly, monthly or even weekly basis is proving more effective. Expedia, Gap, Microsoft, Deloitte and Medtronic are just a few examples of companies who have remodeled the way in which they give employees feedback and evaluate their work.
So why the shift? Problems with the old way
Employers face a variety of challenges when it comes to carrying out the typical annual performance review process. Many of these challenges are simply due to the fact that the review generally occurs just once a year.
Performance reviews are helpful only if they are honest, consistent and well documented. If an employee with chronic performance problems receives satisfactory performance reviews once each year or if the employer fails to otherwise document the employee’s ongoing performance problems, the employer may have a difficult time defending a subsequent disciplinary action. Further, if that employee is terminated by the employer for poor performance, the positive performance review will be the primary exhibit in the employee’s charge of discrimination or retaliation. Having regular reviews or conversations on a more frequent basis may help an employer address relevant issues on a consistent basis as they arise instead of sweeping them under the rug at the end of the year review.
It is also problematic to tell an employee one thing, but then document something else. Employees expect a straightforward assessment of their performance and being dishonest with the employee will lead to misunderstandings or worse later. Further, if a manager tells an employee that she has nothing to worry about, despite a bad written review, it greatly undermines the ability of the written appraisal to support any negative action the employer may take as to the employee in the future. When employers have the opportunity to address shortcomings with employees on a more frequent basis, the employee has more opportunities to understand and correct them.
Meeting with employees on a more frequent basis can also facilitate management’s ability to give more specific feedback as opposed to making general, vague statements about the employee’s performance at the end of the year. Addressing problems in bite- sized pieces over time seems to be an easier message to deliver than waiting until an arbitrary time to discuss a year’s worth of bad performance concerns. The more specific the feedback an employee receives, the better equipped the employee will be to fix issues and the more effective the manager will be in evaluating improvement.
Avoiding the tendency to stereotype
Many of the above errors with annual performance reviews occur due to stereotyping of some kind by a supervisor. Stereotyping is not always negative but rather can also occur due to bias such as favoritism. To avoid stereotyping, a manager should keep a clear, open mind, stick to the facts and focus on the employee’s actual performance. This is easier to accomplish when those facts are fresh in the manager’s mind.
The “halo/horn effect” is one type of stereotyping that refers to the tendency to over or underrate a favored or less favored employee. This effect may also occur when a manager gives an employee the same rating as the employee’s previous performance review simply based on bias from the prior year’s performance, or based on the employee’s demeanor or a shared interest.
“Recency error” occurs when a supervisor lets recent events or performance, whether outstanding or unsatisfactory, closely preceding the review counterbalance an entire year’s worth of performance. For example, an employee who does a stellar job the week before the review meeting can offset mediocre performance over the prior months.
The “cookie cutter effect” occurs when a supervisor does not focus on individual specific performance and rates all employees, or groups of employees the same. This can occur in a team setting when a manager ranks an employee’s performance relatively high or low, based on an entire group’s performance, when the employee may have been a high contributor or low contributor to the overall success.
Employers who are eliminating or modifying performance review processes are motivated to do so not only to avoid the problems mentioned above, but also in an effort to develop their employees faster and to accommodate the ever-changing nature of the work to be performed. What is applicable and relevant in January may be much different than what is needed in December. Employers are continuing to look for ways to stay more in-tune with their workforce in order to meet those evolving needs and goals.