News & Insights

This is the first in a two-part post addressing a workplace issue that likely causes employees and supervisors as much consternation as any aspect of their employment:  The Annual Performance Evaluation.

A growing number of small and medium-sized employers are jettisoning the traditional annual performance evaluation for more innovative and inspiring ways of measuring and improving performance.  Changing the status quo may take a bit more effort, but organizations that have made the switch are increasingly pleased with the results – a more productive, contented, and invested workforce who has a clearer understanding of what is expected of them.

In this first installment, we’ll quickly examine why companies cling to the idea that traditional performance evaluations are necessary and explore what other companies have found as a viable alternative.  In a couple weeks, once these insightful nuggets sink in, we’ll offer for those of you not ready to let go of your traditional evaluation forms some best practices to keep employee reviews from being an even bigger headache than they already are.

Old habits are hard to break

For most companies, the annual performance evaluation is a matter of inertia – they do them because they’ve always been done.  The evaluation process may have entered the digital age and moved to a web-based system, but the general principal is the same:  a supervisor ranks her direct reports’ performance on a numerical scale, usually ranging from “1=unsatisfactory” to “3=meets expectations” to “5=exceeds expectations,” and may enter ad hoc examples or comments to support a particular ranking.  The result is a static snapshot of an employee’s performance that may be subject to all sorts of ambient distraction, misunderstanding, and misperception.

The formal evaluation process often continues in other businesses because it’s relatively easy, especially in relation to figuring out how to really measure an employee’s performance.  A supervisor simply spends a Sunday afternoon selecting radio buttons in an off-the-shelf Human Resource application, pecks out a few anecdotal recollections of an employee’s accomplishments or shortcomings, and, BANG, evaluation season is well underway.  Follow this with a day or two of moderately uncomfortable face-to-face meetings between the already overworked supervisors and their unsuspecting subordinates, and, before you know it, you’ve survived another year of performance reviews.  Everyone goes on relieved, if not satisfied.  The supervisors’ workload and the employees’ nerves are merely collateral damage in the name of expediency.

Immediate feedback promotes immediate improvement

As new research demonstrates the relative ineffectiveness of the yearly performance review, especially for younger, attention-starved millennials, companies are realizing that the evaluation and performance-improvement process should be ongoing.   When objectives are set and progress is measured only once every 12 months (if that), the learning opportunity is often lost.  Goal setting, feedback, direction, and assistance should not be limited to a once-a-year nod to a HR policy checklist.

Consequently, a growing number of companies are finding ways to (i) increase individual employee’s roles in establishing personal and organizational objectives, (ii) provide real-time feedback on performance, and (iii) offer contemporaneous assistance to employees to achieve the goals they helped set.  The retrospective nature of the traditional once-a-year process, particularly when it is tied to prospective compensation decisions, almost inevitably takes on a punitive feel; but when the employees are offered a role in the process and provided with more timely feedback (for a job well done or constructive criticism), the learning curve is unquestionably accelerated.

My experience shows that very few employees knowingly disappoint their boss.  Letting employees know as soon as possible when expectations have not been met increases the likelihood that performance will improve.

What gets measured gets done

The nature of the goals being set and standards against which employees are evaluated also seems to make a difference.  A series of unemotive, detached criteria such as those found on most traditional “1-5” evaluations (e.g., “Communicates well with others,” “Is willing to work necessary hours”) is obviously less than inspirational – both for the supervisor completing the review, as well as the employee receiving it.   Attaching any real-word significance to these nebulous concepts is difficult, if not impossible.

Instead, companies that link an employee’s evaluation and performance to the organization’s goals, results, and values find that employees becomes more invested in their responsibilities, as well as the business’s bottom line.  Employees want transparency and to know that they’re being treated fairly.  By providing a mechanism through which employees can understand how their performance impacts the company’s results, companies are more likely to get all of their folks pulling together.

For instance, sharing marketing research with a call-center employee that customers’ satisfaction increases by 20% when their call is answered in less than two rings may put into context the otherwise bland goal of quickly answering the phone.   Likewise, providing a sales person with a cash-flow report to show the importance of getting his orders in on time may help illustrate to him that his performance really does affect the bottom line.

Managing managing performance is hard work

Many supervisors use the annual performance review as a crutch for the hard work of actually evaluating, providing feedback on, and improving performance.   Asking them to evaluate, communicate, and coach on a daily basis may seem completely out of reach.  But managing employees is hard work, and this is where your managers earn their big dollar paychecks.

Starting from the corner office and working down through directors and senior managers and managers, those who are responsible for other employees should be trained, encouraged, and motivated, to provide their subordinates with the feedback, coaching, and instruction necessary to make the yearly evaluation obsolete.  This includes evaluating managers on how they set goals and deliver feedback to others, as well as tying their compensation and advancement opportunities to how well they conduct their ongoing performance evaluations.

Mistakes, questions, and hiccups during the transition are to be expected, but a program of ongoing evaluations is likely to pay dividends in employee satisfaction and productivity.

If after reading this, you’re still not ready to abandon the annual performance review, think about it for another week or two.  If you’re still not ready, I’ll offer some tips in a later post for how to make the practice a little more tolerable for your folks.