Learning & Development

The Annual Performance Review Is Dead

It’s time to ditch the annual performance review and replace it with something better.

With the typical review process, most employees get clarity on their performance just 1 or 2 days per year—if they’re lucky. And so many employees in the workforce dread the experience, which typically begins with a required self-assessment of performance, entering a year’s worth of accomplishments into what feels like a black hole of an HR system. After submitting their self-assessment, their manager invites them to sit down face-to-face to review what they put in the system. The performance review box is checked, and everyone moves on until next year. This impersonal and infrequent method of assessing performance is misleading at best and unfair, biased, and disengaging at worst.

None of us would expect to become an expert at anything if we had instruction on how to improve only 1 or 2 days per year, and this approach is not in line with how we run our businesses either. A company’s goals and priorities are dynamic to the market and the resources available. Most companies meet regularly to define and iterate goals, priorities, and key performance indicators (KPIs), so why should this be any different for employee performance? Performance discussions should take place consistently and regularly if we want to make the most of the skills and talent our employees bring to the table.

Even more importantly, employees want this, as well. Ninety-two percent of 1,000 U.S. workers polled want feedback about their job performance more frequently than once a year. Employees want to know what the expectations are, and they want to know how they are performing against those expectations. It’s fundamental to their fulfillment, growth, and development, and it’s how they determine whether to stay or go.

This is exactly why it’s time to move away from the annual performance review and move toward a performance management approach that is dynamic, responsive, transparent, and consistent. If organizations do this right, their talent will reflect all of those values, as well.

Moving from performance reviews to dynamic and consistent performance management requires intentionality and a mindset shift. Here are the core principles to guide the way.

 Set Clear Expectations From the Start

The employee experience begins the exact moment an applicant reads a job posting. Every touch point after that needs to reinforce accurate and realistic expectations around the role, the potential growth opportunities, and the performance management approach within the organization.

Not only does this ensure that you get the right talent in the door, but it also sets the foundation for long-term success and satisfaction. When employees join a company, they should know what is expected of them in the role they were hired for and have access to resources that clearly outline the pathways to advancement. These resources can help employees better understand how and when to invest in their learning and development and can support better discussions about goals and aspirations with their managers.  

Measure Performance in Terms of Clearly Defined Competencies

The job description, performance metrics, and pathways to promotion should consist of—and be measured by—clearly defined competencies. Competencies provide a language that shows talent how they can improve and get promoted and also help employees understand the expectations around what should be done and how it should be done.

Competencies can include cultural competencies, such as the organization’s stated values. These competencies must be defined and communicated across the entire organization and within teams. Additionally, skill-related competencies should be unique for each role, job level, and function. Clearly defining these competencies on a granular level allows employees to fully understand expectations and also helps them better manage their own performance on a day-to-day basis.

An important note: You must address equity here. That means that all employees should have the same number of competencies across the organization. Of course, their org-level and cultural competencies will be the same, but it is up to leaders and managers to determine a consistent number of role-specific, functional competencies that each employee is measured on. This is the only way to ensure fairness and equity across functions, which is what your talent is looking for. Only then can you create balanced and equitable growth opportunities for employees across the entire organization.

Provide Real-Time Feedback That’s Directly Tied to Competencies

Once competencies are defined, real-time feedback throughout the year should be directly tied to those competencies. This grounds expectations and allows employees to have a clear and ongoing understanding of their roles and performance. It can also be helpful for managers to facilitate more meaningful and engaged performance conversations with their employees.

Helping talent understand what they are doing well around a particular competency and what they can improve on in that same competency is a great way to address feedback. A good practice is to direct employees to be specific about the competency they’d like feedback on and then talk through one thing they are doing well and one thing they can improve on within that competency. This process can be aided with the help of technology. Look for a platform that will assist with real-time feedback against competencies.

Remember that this approach should not be siloed on specific teams. Across the organization, a culture should be built that encourages talent to frequently ask for feedback from anyone they work with.

Feedback is meant to help make talent stronger and it’s what employees want. We need to give them the tools and skills to constantly improve.

Realign Over Time

Finally, shift and reevaluate performance based on these defined competencies throughout the year. Not only does this support continual improvement, but it also elevates performance on an ongoing basis and helps employees realign with company goals and priorities that may have shifted for one reason or another. With this approach, managers make it easy for talent to identify where they want to put a focused effort, and it creates a dialogue that is laser-focused on learning, development, and growth. Revisiting, documenting, and realigning competencies over time also prevent recency bias, ensuring managers are evaluating the full picture of performance and not just that last great project.

Your talent wants fairness, equity, and transparency above all else. There is simply no way to achieve this in a once-per-year meeting. Your talent wants more, and let’s be honest: So do you.

Jason Medley is Chief People Officer at Codility.

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