Extraordinary Team Blog

Abolish the Dreaded Annual Performance Evaluation!

Posted by Joseph Sherren on January 23, 2017

I know I have discussed this in earlier blog postings, but now I see evidence that more and more companies are abolishing the Annual Performance Evaluation (APE).

Of course, there will be some organizations, and especially governments, that will attempt to prolong the life of this fading dinosaur, but in the end it will be gone.

We are entering the time of year when managers go through the annual ritual of creating documentation, meeting with employees, and establishing a number that puts each employee into an evaluation box to justify not only their subjective opinion, but satisfy human resources.

Some of the more forward-thinking companies are actually scrapping the outdated ritual altogether.  I have been studying this process for years and here is what I have found:

  • There is no research that shows performance evaluations motivate staff to higher levels of performance, improves loyalty, or increases productivity;
  • It often destroys relationships between employees and managers;
  • Productivity is often at its lowest during the performance evaluation season and the focus on customers is averted.

An academic review of more than 600 employee-feedback studies found that two-thirds of appraisals had zero and sometimes even negative effects on employee performance. This was confirmed by a 2010 survey by Sibson Consulting Inc. and documented by WorldatWork.com. See new studies here . .

The usual process is that employees’ performance is reviewed once a year based on a five-point scale, and plotted on a bell-curve distribution. This rating is then used to determine salary, bonuses, and promotability. These reviews often cause work disruptions, anxiety and sometimes will even de-motivate employees.

Instead of these annual reviews, what the majority of new workers are looking for is regular (monthly/weekly and sometimes daily) feedback on performance outcomes and efforts. This should include discussing areas of opportunity as well as performance encouragement.  Replace writing up lengthy assessments with a discussion on how they can improve and what support they need from management in order to achieve their objectives.

I know there is a feeling that without documented reviews, some employees may be able to slack off without repercussion. Others may fail to be recognized for their achievements.  As well, this change will bring up a concern now on how to compensate people.

The current trend is towards ROW (Results Only Work).  Pay people for what gets done, their contribution to the team, how they have increased revenue or decreased expenses combined with feedback from clients, not for being prisoners at a desk for eight hours a day. Another emerging trend is towards group and company-wide performance bonuses.

There is a growing list of companies that have given up the annual performance evaluation yet are experiencing positive outcomes.  Some have reported lower turnover, higher employee morale and productivity, and a more positive working relationship between managers and employees.

When a coaching and feedback session is not “used to judge”, but to help improve, employees are more open to accepting feedback in the areas they need to improve and feel more positive toward management, resulting in more constructive employee behaviors.

However, eliminating the annual appraisal will only work if the organization begins right at the onboarding process and incorporates scientifically validated hiring assessment tools.  This will ensure that potential employees fit the culture and possess the talent and potential to succeed.

This should be complement with mandatory management skills development, timely employee orientation, and creating a culture of continuous coaching from a competent management team.

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