Is the Annual Performance Review Being Scrapped?

Dec 9, 2013
7 Min Read

Hear that whooshing sound? That’s the collective sigh of relief from Microsoft employees who won’t be subjected anymore to the company’s despised stack rankings.

Under that system, employees were essentially forced to compete against one another to receive excellent performance rankings. The rankings were supposed to cull the weakest from the herd, but instead it led to employees feeling helpless and somehow encouraged to backstab colleagues to get a better ranking.

It’s estimated that at least 30% of Fortune 500 companies use such rankings that rate employees along a curve. For example, an employer might state that a manager can only put 10% of employees in a top category, while 2% must be in the bottom group.

But Microsoft was often criticized for using the “yank and rank” process made popular at General Electric in the 1980s. Motorola CEO Greg Brown has referred to its ranking system that it eventually tossed as “demoralizing” and creating a “culture of infighting.”

But Samuel A. Culbert has argued for years against that even annual performance reviews are horrible, calling them “one of the most insidious, most damaging and yet most ubiquitous of corporate practices.”

“Everybody does it, and almost everyone who’s evaluated hates it. It’s a pretentious, bogus practice that produces absolutely nothing that any thinking executive should call a corporate plus,” Culbert says.

Culbert, a professor at the UCLA Anderson School of Management, argues that companies should instead use what he calls “performance previews.”

Under that scenario, an employee outlines what kind of supervision helps him or her operate most effectively and what kinds of past management practices cause a problem in getting work done. The manager then shares with the worker what is needed for the manager to be most effective.

Ongoing discussions about how to best combine their talents would then help them communicate better and deliver better results together, he argues, and puts an end to performance reviews that he says are nothing more than “intimidation.”

Employers are clearly re-thinking performance management, but what will evolve is under debate. Will all companies eventually abandon rankings? Will the annual performance review be scrapped as well? While experts debate the merits of how best to manage their employees to achieve results, here are what some other employers are trying:

  • Motorola. The company scrapped its employee rating system because CEO  Brown worried about how employees might feel being called a “valued performer” rather than “excellent” or “outstanding,” he told Crain’s Chicago Business. Managers and employees now have ongoing communications about performance in addition to the annual reviews that ensure employees met their goals. Pay discussions are handled separately.
  • Adobe. The company ended performance reviews in 2012, after the employer noticed greater employee turnover after the annual reviews. In an interview with Human Resource Executive, Donna Morris, senior vice president of people resources, says that the reviews were an outdated process and made people feel like they were labeled. Adobe now uses “The Check-In,” which is an informal way of offering real-time feedback. Managers can decide when and how and in what format they set goals and offer feedback and employees are evaluated on what they achieve against their goals. And in what may be music to the ears of many managers: There are no forms to submit to human resources.
  • Expedia. The company told HRE it also relies on real-time feedback, saying it provides “course-correct” opportunities, rather than relying on “rear-view mirror” feedback in traditional reviews, says Connie Symes, executive vice president for global human resources.
  • Kelly Services. The company abolished scores after feeling something wasn’t hitting the mark with its performance management. An internal study found that managers were spending an average of seven hours per employee conducting a performance report, but not much of this time was spent in one-on-one conversations with workers. In annual performance communications, employees now meet with their supervisors and establish three to five goals for the year aimed at helping meet business objectives, along with personal professional development goals. Progress on these goals is discussed throughout the year.

It’s not clear how Microsoft’s performance evaluation process may change or evolve with the selection of a new CEO, but it is evident that more employers are recognizing that ranking and rating employees once a year doesn’t yield better performances.  Still, scrapping systems that have been used for decades may not be easy, so employers like Adobe and Expedia may be providing a new blueprint for others to follow.

What suggestions do you have to improve performance reviews?

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