Are performance appraisals a thing of the past?

Are performance appraisals a thing of the past?

No one – neither reviewer, nor recipient – looks forward to the annual performance appraisal process that determines your bonus pool allocation and chances of promotion to the next level. 

Back in 2012, Adobe became one of the first few companies to entirely abandon yearly performance appraisals, whilst other large global companies including Accenture and General Electric have since followed suit. Recently, India-based Tata Consultancy Services also abandoned the forced annual reviews in favour of a continuous feedback process.

One of the major criticisms against the performance appraisal is the artificiality of the whole process. Managers are often forced to point out weak areas for even the best performers. A bell curve also dictates that someone in every department must be in the ‘poor’ bracket.

An annual performance conversation also becomes irrelevant in a rapidly changing environment where 6-month-old plans may be abandoned to meet a new competitive threat.

Undeniably, the dislike for performance appraisals seems universal. Yet, many businesses need a formal review tool to assess employee performance and create a paper trail - especially if dismissal is looming.

Appraisals are also still needed for management to determine and standardize pay, bonuses and promotion possibilities across different departments.

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Focus on outcomes instead of activity

One school of thought advocates focusing on outcomes – such as customer satisfaction – instead of activity, such as number of calls made in a day. But some roles may find outcomes tricky to measure and managers may settle into measuring widgets again.  

Performance management instead of performance appraisal

Enter the quarterly performance appraisal. A more bite-sized version of its predecessor, companies like IBM are increasingly adopting these more frequent – but shorter – feedback sessions. The company’s Checkpoint allows employees to set shorter-term goals with managers providing feedback every quarter.

Deloitte is also experimenting with using four simple questions in its reviews. Others, like Accenture, are moving towards everyday performance management instead of an institutionalised annual conversation.

In an interview with the Washington Post, Pierre Namterne, CEO of Accenture said, “Performance is an ongoing activity. It’s every day, after any client interaction or business interaction or corporate interaction.

“People want to know on an ongoing basis, am I doing right? Am I moving in the right direction? Do you think I’m progressing? Nobody’s going to wait for an annual cycle to get that feedback. Now it’s all about instant performance management.”

Performance appraisal is a two-way street

One of the drivers for Accenture to adopt “instant performance management” is the increasing number of millennials in the workforce. Research from the United States found that 7 in 10 millennials see the performance appraisal as a flawed process and nearly 9 in 10 want more regular performance conversations with their manager. A further 32% want to share thoughts on their own performance.

There are more companies embracing a two-way conversation and rolling out apps such as General Electric’s [email protected] which allows employees to both give and request feedback.

In her blog post on doing away with the annual performance appraisal, Donna Morris, executive vice president customer and employee experience for Adobe said, “We don’t have labels, a formal tool or prescriptive time of year it all has to happen – we just ask people to have conversations.”

A rose by any other name                

The annual performance appraisal may soon be a relic of management past. But most companies still need a formal review system to manage and motivate staff.

The annual appraisal has thus morphed into a more regular performance management process where managers can focus on coaching and supporting staff to grow on an everyday basis – as they should.

Click here for more information on how you can reinvent your company’s employee performance review, or head over to our management advice section­ for the latest hiring and management tips.

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