Annual Performance Reviews: Valuable Exercise or Useless Dinosaur?

by Granville Triumph

Annual performance reviews seem simple enough. Evaluate how well an employee has performed his or her job, offer feedback, discuss expectations and accomplishments, establish new goals, document all information, and discuss your assessment with the employee. Performance reviews also give the employee a formal platform for asking questions and addressing concerns.

However, performance reviews are only effective – and fair – if you have a consistent performance review system that serves as a framework for measuring and evaluating performance.Without a system in place, performance reviews tend to be overly negative when the company is struggling. When the company is thriving, employees often receive praise that is unjustified. There needs to consistency in criteria and execution.

Although it would make life easier for business owners and human resources managers if performance reviews could be based strictly on objective, easily quantifiable data, that’s not how the world works. There needs to be qualitative information that provides context for your quantitative data to ensure fairness.After all, measurement of one is inherently relative to the measurement of another.

For example, most organizations will rate employees in a variety of categories as part of a performance review. At the same time, there could be unique circumstances that contribute to an employee’s low or high rating. Did one salesperson struggle due to the distraction of a family illness? Did a single client who dramatically increased their budget a few weeks ago mask an otherwise poor year for another salesperson? This is why you need to put all ratings and data in the right context.

A performance review system should be designed just like any other business process.What’s the goal of a performance review? What are you doing between performance reviews to achieve the best possible outcome? Does the employee know how they’ll be evaluated? Are you seeking input from the employee? What preparation is involved for the discussion with the employee? Are you showing up with a rating sheet or taking advantage of the opportunity to offer constructive feedback? Are you having a two-way discussion?

Here’s another question that might throw you for a loop. Do you even need performance reviews in this age of collaboration and constant communication?Some have argued that performance reviews are more about exerting power and control, not practicing strong leadership. If an employee needs feedback or criticism, wouldn’t an effective leader address the issue right away?

This is understandable in the case of knowledge workers. An employee in a warehouse or manufacturing plant can be evaluated in a fairly straightforward manner based on how much work is done, how quickly and how accurately. The job of a knowledge worker is more complex. Skills and talents such as collaboration, problem solving and persuasion play a bigger role.

Many large enterprises have eliminated annual performance reviews.Highly structured rating systems and often awkward annual reviews have been replaced with ongoing feedback through a mobile application. This more responsive approach can help build momentum or stop a bad trend. In addition, eliminating performance reviews can save time, money and mountains of paperwork.

You have to determine which approach is best for your organization. If you do continue to conduct performance reviews, whether annually, quarterly or ongoing, make sure you have a system in place to maximize the business value of the process and achieve your desired goals.

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