I know, I know. You think performance reviews suck. You're probably right, they probably do. But is the alternative - not doing them at all - really better?
I've always thought the biggest lie with the sexy, "we're eliminating performance reviews" clique was the assumption that managers of people in your company could deliver what's required to make sure employees still received feedback on how they're doing without the formal performance review.
My experience is that all of our managers could stand to get better at delivering feedback, and most avoid real feedback sessions with employees like the plague. After all, feedback is confrontation, and most of us avoid confrontation if left to our own devices.
The formal performance review forced that feedback at least 1X per year. A recent CEB study found a drop in employee engagement and performance across companies that eliminated performance reviews. More from Fast Company:
A small but growing cohort of Fortune 500 companies made headlines recently when they broke with tradition and ditched the annual review.
Executives claimed performance reviews were often inefficient. Neuroscience backed them up. One study found that the dread filling employees prior to a review can restrict creativity. Another revealed that performance reviews foster a fixed mind-set in which the employee believes they’ll never be able to improve and achieve professional growth.
So it made sense to toss the annual review process. Leadership advisory firm CEB found that the number of Fortune 1000 companies eliminating the annual review increased to 12% in 2015 from 1% back in 2011.
But CEB subsequently found that getting rid of the review didn’t always reverse its restrictive effects. In fact, it proved to drop employee engagement and performance by 10%.
CEB’s researchers polled nearly 10,000 employees in 18 countries. Workers came from a variety of industries and organizational sizes. The researchers then compared outcomes and perceptions of those employees in organizations that use performance ratings to those in organizations without ratings. They also did a series of interviews with heads of HR to get a handle on trends and challenges for performance management.
Why did that happen? CEB’s analysis also found the following contributing factors in companies that dropped the formal/annual performance review:
- Manager conversation quality declined by 14%
- Managers spent less time on informal reviews conversations
- Top performers’ satisfaction with pay differentiation decreased by 8%
- Employee engagement dropped by 6%
Which sounds a lot like this - when you eliminate the annual performance review, it decreases the pressure on managers to have their s### together related to being able to defend their stance on an employee's performance level .
When the pressure goes down, it sounds like manager's coach less, not more.
So if you're going to eliminate the performance review, you'll need to become a LOT more formal with your expectations on things like 1-on-1's. If you don't get more formal with those things once you eliminate performance reviews, the CEB study shows managers coach less, not more.
The numbers don't lie. If you're thinking of being sexy and eliminating the performance review, you better have an alternative structure in place to force managers to coach - or they won't.