Plenty has been written in recent years about the decline of the performance appraisal, in fact, according to July’s People Management magazine, just 4% of HR leaders feel that their appraisal systems or processes are effective. However a survey by CEB found that the overall results and productivity of firms that ditched performance appraisal fell by up to 10%, employers felt that pay rises were less fairly allocated and managers reported increased difficulties in managing talent.
It’s hardly surprising though when you think about it – just because a process isn’t being executed well doesn’t mean the process itself is at fault. Cleaning your teeth is a process that is highly effective in preventing tooth decay – but if you do it too infrequently or inconsistently there is every possibility that you will end up with a painful visit to the dentist.
When it comes to appraisal systems or processes, one criticism is the fact that the approach is retrospective focusing more on the past more than the future. Perhaps the fact that so many companies use the term performance review emphasises this problem. We recently conducted a review of the evidence around performance management in conjunction with the University of Southampton (download it here) and it is very clear that performance management does drive performance but only IF the focus is on goal setting and regular review or feedback. So, we are talking about a collaborative, forward focused activity with shorter more frequent review points.
Are businesses really ditching their appraisal systems?
Interestingly, when we unpick the headlines to understand what companies that are ‘ditching reviews’ are really doing, it is clear that they are very rarely ditching their appraisal systems altogether. In fact many businesses such as Microsoft, Expedia and Deloitte are simply ditching the annual performance rating or forced ranking system. However, companies like Adobe are usually actually replacing this with quarterly check ins or pulse points, in fact the Global VP of People and Places at Adobe states that the share price has risen from $30 to $80 since ‘Check-in’s’ replaced annual appraisals.
That all makes sense but is disingenuous to label this transition to more frequent quality conversations as appraisal being dead. Rather, it is an example of businesses re-branding a process which probably should have been done like this in the first place. For example, it is common sense that if you set a financial budget for the year, you need to check in on it monthly to ensure you are on track. If you want to lose weight, you don’t set your weight loss goal and never stand on the scales again, you check in weekly. So why would we ever think that carrying out a once yearly performance review would be an effective way of managing people?
To my mind appraisal systems are far from dead, these businesses are reviving performance reviews and practising the conversation part more frequently. This creates a need for appraisal systems that are more flexible and enable ongoing conversations. The key to success is through quality and frequency as opposed to long and painful annual meetings, however, as with all these things it will all depend on the execution.
To understand more about the benefits of appraisal systems: Click here