Do Annual Reviews Add Value

In 1995 I wrote an article on performance management. My conclusion was: if managers were being honest with direct reports, focusing on what people are doing right and what is required to be done, the need for the formal annual appraisal would no longer exist. Frequent dialogues between manager and direct report about what is important, not urgent, would render yearly meetings on the subject unnecessary.

The fundamental change would be:

• looking forward, not looking backward
• holding in the moment
• just in time dialogues based on behavior
• skill and knowledge to get things done
• a focus on possibilities; not on history that cannot be changed.

My speculation then was this change would result in forward thinking conversations about what could happen – about the possible. The one missing piece of that concept then was the articulation of consequence, both positive and negative, for meeting commitments. Twenty years later some organizations are thinking of this concept and a limited number have already begun the journey.

What do organizations need to do to move away from the historical review to a forward facing dialogue about possibilities and success?

1. Both manager and employee takes accountability and responsibility for their role in the ensuring commitments are met
2. Objectives are determined at the start of the year with the employee seeing clearly their contribution to the company meeting the strategic business plan.
3. Both positive and negative consequences for meeting or not meeting commitments are clearly stated. At year-end, management acts on the consequences.
4. Senior leaders, including with the CEO and the Board, see performance improvement discussions as a business activity that is essential to company success.
5. A performance improvement environment is embedded that focuses on recognition of positive things people are doing to demonstrate the desired behaviors both for their role and the values of the organization. This would require that organizations define their values in a way that is not aspirational and is in clear statements of behaviors, not outcomes.
6. The HRIS is not bought off-the-shelf but is rooted in the company philosophy and captures the values and the role behaviors as defined by the company, not the HRIS consultant’s dictionary.
7. There is an end to results-driven pay for performance. Compensation must be delinked from the performance improvement process. There is conclusive research showing that pay for performance actually results in lowered productivity and has other less than desired impacts.
8. Managers and employees are trained on a process of dialogue that enables both parties to initiate a performance conversation that is open-minded and fact based.
9. Managers and their direct reports have to have meaningful and regular dialogues on how the employee is doing. These should occur even when things are going well to reinforce the positive, not only when things are not as desired. The ‘check in’ exchange needs to be initiated by either party at least every eight weeks.
10. Managers have to provide the time and support for employees who are struggling. They cannot pass this activity off to someone else. After all having the accountability for helping direct reports be successful is part of a manager’s job description.

In short, to enable an employees’ success you have to be forward looking, not reviewing what they did wrong based on historical data that cannot be changed.

Is such a system possible? Starting in late 2011, Adobe has broken ground with a transformation of their former performance management process to a series of ‘check-in’ dialogues. The process has three forward-facing steps.

1. The manager and employee come to a mutual understanding of what is expected of them and why
2. The manager meets with the employee at least every two months for a check-in providing feedback and gathering information on how to help the person be successful in meeting their commitments
3. Manager and employee must talk about expectations and frame the discussion as an opportunity for growth.

Adobe has introduced this approach in all its global locations. By and large, they have found that, by severing compensation from the performance dialogue, motivation and innovation have actually increased. This is a very positive development, and a healthy sign that forward facing performance dialogues are critical tools for developing people according to organizational values and strategic needs. It shows that people respond to open, timely, and future-focused conversations that help them improve and succeed. Not to mention that Gen ‘Y’ or Millennials crave constant feedback that is both positive as well as show how they can get better at what they have to do.

The future of performance improvement dialogues will happen when there is mutual responsibility to help one another be successful. When the employee can initiate the dialogue and both sides have meaningful consequences. This will only start when the leadership of the organization has the courage to act on the consequences because someone does not meet their commitments. This will all happen when performance reviews stop being a review of the past and the focus is on the future. When managers begin to ask appreciative questions and stop to really listen to the answers. The future of performance improvement will be when the manager ends the dialogue with a question inquiring as to how the manager can help the direct report be successful and then act on that request in a meaningful way.

This will flip the performance dialogue to a proactive and positive experience. It will result in improvements to execution of the person’s objectives, heightening engagement resulting in retention. This will become a proactive process on how everyone, at any role, can move the company toward accomplishment of the strategic plan and achievement of the vision.

In this way, performance appraisal is not necessary because people have up to day knowledge of how they are doing and what they can do to be more successful. The consequence: the need to have formal reviews is eliminated along with the traditional ‘scores’ that come from those formal reviews.

In introducing the process in all locations around the globe Adobe operates they first explained to both managers and individual contributors what was going to happen and then trained them on what the process entailed. They have delinked compensation and the performance dialogue and they have increased innovation.

Back in the beginning of the appraisal process the journey began with the premise that people work for money. Along the way Management By Objectives came into play and eventually Forced Ranking. All were designed to improve employee performance. The reality is they did not or we would no longer be looking at the issues of performance improvement and productivity. Reality is these process actually had negative reactions diminishing innovation and killing teamwork.

The journey to discover what will have a positive lasting impact on people to motivate them and have them work successfully is still ahead of us. The rear view approach has not worked. Perhaps the forward looking proactive approach, based on continuous improvement of people through brutally honest performance feedback, in the moment is the next evolution in the performance improvement journey.

We invite people to share their ideas of modernizing performance management. While the ideas in this post might not be the newest, they are certainly an update for many organizations whose performance management systems are stuck in the past (literally). What ideas have worked for you to improve performance management? What concerns do you have about moving your performance management system to be rating free? If you have moved to a qualitative approach how do you measure the performance of your performance management system? It is now almost 20 years after I wrote my initial article and still, most organizations I encounter manage past performance hoping it will have an impact on the future. Still, most organizations hope the performance management system will add value but most feel it adds little to no value.