The Performance Review is one of the traditional performance processes. While most companies currently have a Performance Review process implemented, more and more seem to be moving away from it. What are they replacing it with? For what reasons?  How successful have they been with this change?

 

 

We will start off by a quick reminder of how the traditional Performance Review is managed, before looking into reasons why it may no longer be fully adapted to our modern ways of working and what alternatives may exist. Finally we will discuss whether it still makes sense to maintain a Performance Review in 2020.

 

 

Before we start though, I need to share quickly my personal experience with Performance Reviews. As an HR/HRIS Consultant/Project Manager, over the past 13 years I have:

 

 

·        Personally worked as an employer and a manager for two companies in which Performance Management was an important process

 

o   For the first 6 years for a company with a “traditional” annual Performance Review process

 

o   Over the past 7 years for a company that during that timeframe moved:

 

§  From a “traditional” annual Performance Review,

 

§  To an annual Performance Review without any ratings,

 

§  To an Ongoing Performance Process without any Performance Reviews

 

·         Worked for a number of clients implementing Performance Reviews/Performance Management Tools

 

·         Worked for a number of clients to help them re-engineer their performance processes

 

 

Content of the Performance Review

 

 

While the content of the Performance Review will of course vary, typical areas that are discussed may include

 

·         Goals

 

o   Review/rating of goals for the previous period

 

o   Preparation of the goals for the next period

 

o   Typical types of goals

 

§  Performance related Goals – usually linked to the day-to-day job.                 For example a person in a commercial role will usually have a commercial target as a goal. Ideally these goals will be aligned with  the organization’s global objectives so everyone can understand how they contribute to these global objectives

 

§  Areas of Improvement Goals – these will depend on the individual and will focus of their areas of improvement

 

§  Personal Development Goals – these will depend on the individual and will focus on what they would like to achieve in the future

 

o   It is usually recommended to assign around 3-5 goals to each individual

 

·         Competencies / Skills development (soft skills and technical skills)

 

·         Operational Work analysis

 

·         Feedback

 

·         Training requirements/needs 

 

·         Global Rating – Rating Scale and Comments

 

 

The content of the Performance Form is usually defined by the HR team depending on the HR strategy of the organization. It is often quite formal and therefore the discussions that happen between the manager and the employee are mostly guided.

 

 

How are Traditional Performance Reviews managed?

 

 

·         Most often the process is yearly but it may vary between organizations

 

 

·         In most cases, annual Performance Reviews for all employees are done within the same period  but in some cases Performance Reviews may be done based on employee’s start date within the organization

 

 

·         Performance Reviews are usually done for everyone in the organization but in some cases the organization might use different performance forms for different groups of employees

 

 

·         Example of a typical Performance Review process

 

o   Preparation of the Performance Review

 

§  Self-assessment by the employee

 

§  Input provided on specific topic by functional managers of the employee if relevant (for example project managers linked to projects the employee worked on during the year)

 

§  Assessment by the manager

 

o   One-on-One discussion between the manager and the employee.

 

o   Additional stakeholders input

 

§  Review by Level 2 manager

 

§  Review by the HR team (HR Business Partner for example if relevant)

 

§  Calibration meetings to account for differences in the way managers rate employees, the goal being to harmonize and ensure fair Performance review ratings for everyone

 

o   Based on the feedback from the additional stakeholders, final discussion between the manager and the employee and signature of the Performance Review form

 

 

·         Typical exceptions to be managed

 

o   People who have changed  jobs during the year

 

o   People who have changed  manager during the year

 

 

·         Some organizations also complete 360° reviews. 360° reviews provide an opportunity to collect feedback not only from the management, but also from peers and subordinates. 360° Reviews are often limited to specific populations.

 

 

How are Performance Reviews used after completion?

 

 

·         Input for pay increases – very often the Performance Review process is linked to pay increase processes, the performance of the employee being a key driver in pay increase decisions

 

 

·         Input  for People Reviews and Identification of High Potentials – for organizations who have specific paths for high potentials and who conduct People Reviews, the Performance Review will often be a key input for these processes – for example in building a Performance/Potential N-Box

 

 

·         Input for Succession Plans – when looking for successors for key positions or key employees, the Performance of the employee will often be a key input

 

 

·         Input for training plans – if training requirements and needs are discussed during the Performance Review, it will provide significant input for the training plan of the organization

 

 

·         Input for competency/skill analysis and competency/skill development plans at the organization’s level 

 

 

Limits of the Traditional Performance Review

 

 

·         In a world that is moving faster and faster, looking at performance once a year is not enough. An ongoing Performance Process will be much more efficient in most situations : 

 

o   Goals - In most situations yearly goals make little sense, the employee might change position, be assigned to new projects, the environment might change and require an immediate update of the goals. A much more efficient approach is to review/update/adapt/close/create new Goals on an ongoing basis. 

 

o   Positive and constructive Feedback should definitely be provided on an ongoing basis. For example, if a manager notices for example an area of improvement for one of his employees, they should have a discussion about it as soon as possible so the employee has an opportunity to take it into account. It makes no sense to wait until the next Performance Review to provide feedback.

 

o   When doing a yearly Performance Review, a standard bias is to only look at the most recent events rather than the whole year. By implementing an ongoing Performance process, accomplishments and areas of improvement can be pointed out, taken into account and traced throughout the whole year.

 

 

·         Performances Reviews are extremely time-consuming – especially for managers. To ensure a successful Performance process:

 

o   Preparation of the Performance review will take several hours for both the employee and the manager

 

o   The one-on one meeting usually also lasts several hours – especially if performance discussions only happen once or twice a year

 

o   Managers often need to participate in calibration meetings, discuss the Performance Reviews of their employees with their own managers and/or the HR team

 

·         Creation and follow-up of the process creates a significant workload for the HR team

 

·         Managers who have a large team often end up using up most of their time doing Performance Review work during the entire Performance Review process period

 

 

·         Since Performance Reviews are extremely time-consuming, they are also very expensive for the organization – direct and indirect costs (missed business/opportunities, less focus on clients during the process…)

 

 

·         Most of the Performance Review process is fixated on the analysis of what happened in the past rather than being forward-looking

 

 

·         Performance Reviews are often disliked by managers and employees

 

o   They may be a source of anxiety and annoyance

 

o   They are often viewed as a confrontational process rather than an opportunity to improve things together.

 

o   Even if calibration meetings are done, there are significant differences in the ways managers rate their employees, which might lead to frustration and unfair situations. Since the Performance Review is used as an input for a number of other HR processes (see previous section), employees rated by harsher managers may miss out on internal opportunities. The organization might also be at risk of losing these employees.

 

 

·         In a number of organizations, Performance Reviews becomes a checkbox focused on quantity (X% of all performance reviews need to be done by XX/XX) rather than on quality – be it quality of the information gathered in the process or the quality of the discussions happening to actually improve performance throughout the organization.

 

 

Ongoing Performance Management

 

 

A number of organizations have recently stopped doing Performance Reviews and moved to an “Ongoing Performance Management” process, which is often more adapted to our fast-paced world. Ongoing Performance Management requires regular discussions between employees and managers. These are sometimes called One-on-ones or Check-ins. They usually happen on a weekly, bi-weekly or monthly basis. An ongoing Performance management process may be an answer to the limits of the traditional Performance Review: 

 

 

·         Ongoing Performance Management allows the employee and the manager to adapt immediately to a changing environment.

 

 

·         Most of the time these Check-ins require no or very limited preparation. Discussions are shorter and spread out throughout the year which avoids having a full period more or less dedicated to performance reviews. There is a much more limited risk of losing focus of the business priorities.

 

 

·         Discussions are much shorter than traditional Performance Reviews. They are often much easier as they are often centered on topics that are the current focus for both the employee and the manager rather than having to look back at everything that happened a while back.

 

 

·         Exchanges are much freer (it doesn’t follow a form, like in the Performance Review) and more informal. Usually no rating is provided. This makes the process more centered about the discussion and is often viewed as less confrontational.

 

 

·         Despite the lack of formality it is recommended to formalize main decisions and actions so they aren’t forgotten. Going through the summary and actions of the previous check-in also makes the next check-in more efficient.

 

 

·         Typical topics discussed during these one-on-ones may be

 

o   Operational Work

 

o   Issues for which the employee might need assistance from his manager

 

o   Feedback from the manager to the employee or vice versa

 

o   Review/Adapt ongoing Goals

 

o   New Training Requirements/Needs 

 

o   Administrative discussion (holidays…)

 

 

It is important to note that ongoing Performance Management shifts a significant part of the responsibility from the HR team to the managers and the employees. While the HR team will of course be instrumental in training and guiding managers and employees to ensure an efficient ongoing Performance Management, the managers and employees will need to agree how often and how they meet, what topics they discuss and how they trace actions and decisions. 

 

 

While the advantages of ongoing Performance Management are clear, there are also significant limits/risks/issues linked to removing the annual Performance Review completely:   

 

 

·         We saw that managers and employees are given more responsibility in the ongoing Performance Management process. While it should of course be a goal to make managers and employees more autonomous, reality shows that there are a number of situations where this will not work:

 

o   A number of managers and employees don’t want to have these conversations and will use the lack of a formal Performance Review to simply avoid these conversations completely – they might not do check-ins at all or just “pretend” they are doing check-ins.

 

o   A number of managers and employees do not have the experience/knowledge to be in the frontline and have these conversations without formal guidelines.

 

è In these cases, removing the annual Performance Review, despite all its flaws, may create a worse situation.

 

 

·         This issue is reinforced by the fact it becomes much more difficult for the HR team to trace if the check-ins are happening and also the quality of the discussions. While an HR team can manage and follow a yearly Performance Process and even review yearly Performance forms and assist employees and managers who are clearly having difficulty with the process, it is not realistic to follow in the same way check-in conversations that are expected to happen on a more regular basis and have a much less formal output.

 

 

·         Also, I have noticed that while check-ins are perfectly adapted to short-term discussions such as goals updates and operational issues, there is a significant risk of  long-term discussions  not happening anymore. Most managers and employees have little time available and it is tempting to always focus the Check-ins on the most urgent and operational discussions. Discussions on competencies development, next career steps take more time, more preparation and require taking a step back from everything that is “urgent” to look at the larger picture. The Performance review “forces” everyone to dedicate some time to look at this larger picture at least once a year.

 

 

·         Finally we saw in section 1 that the Performance Review generates a significant amount of data that can be used as input for a number of other HR processes – for example people reviews or pay increases. Check-ins on the contrary will not provide the kind of input required – even if decisions and actions are traced in a system, the lack of “formalism” becomes an issue. If the Performance Review disappears completely, there are of course other ways of collecting the required data, but this may require setting up additional process with the risk of creating additional confusion and making the performance process even more time-consuming.

 

 

Of course it’s important to note that the level of risk will depend on the context, the HR maturity, the managerial culture and the autonomy of the employees and managers in each organization.

 

 

 

·         It is clear that the traditional Performance Review is no longer fully adapted to our constantly changing environments.

 

 

·         Setting up an ongoing Performance Management process solves a number of the issues.

 

 

·         That being said, removing the Performance Review completely creates a number of new risks and issues that need to be addressed. The Performance Review is not dead yet !

 

 

·         A solution might be to implement ongoing Performance Management processes/check-ins and use them for what they are most adapted to.

 

And at the same time, provide employees and managers with an opportunity to take a step back in a simpler and less time consuming Performance Review process that focuses on long- term discussions (competencies development, next career steps) and provides the basic input required by other HR processes (for example a global Performance rating).

 

If employees and manager discuss Performance regularly during the year during their check-ins, the time required for the Performance review will decrease significantly and the quality of the information provided will improve drastically. In my experience when Check-ins are done regularly and efficiently during the year, the Performance Review becomes a quick, easy and appreciated process.