For decades, performance reviews have been part of the annual business cycle. And for just as long, they’ve been largely detested by everyone involved. They’re seen as time-wasters and, in the worse case, unfair to employees.
But in recent years, performance management has been undergoing a makeover, in what the Harvard Business Review have called a performance management revolution.
In our ebook, Making performance reviews work: Culture Amp’s guide to effective employee performance evaluation and development we step through in detail why traditional approaches to performance management don’t work and the six steps to designing a new approach that does. Here are some highlights.
Why traditional performance management is broken
When companies first introduced annual reviews, the idea was that they’d help improve performance and return on investment. We now know they deliver neither. The question is, why not?
When we looked into what was going on with annual reviews a little more closely, we found they faced five main challenges:
- They mix evaluation with development
- Peer feedback is used in evaluations, which can derail the conversation
- The coaching cadence is too infrequent and doesn’t match modern needs
- There’s an over reliance on single managers, who often make isolated performance decisions, which can introduce biases and siloed views
- They emphasize ratings and forced distributions that don’t recognize the complexity of modern work.
Six steps to more effective performance reviews
So if traditional performance management is fundamentally broken, the question is: where to from here? For many organizations, like Netflix, Buffer and Adobe, the answer is to banish annual reviews altogether.
Despite the level of disenchantment with existing processes, getting rid of annual reviews is a big cultural change. These six steps will help establish a firm foundation for a fairer, more effective modern performance review culture.
Step 1: Establish your reward system
Your reward system should reflect your organization’s culture and values; it signals to employees which behaviors the company holds in high regard. This means looking at the various factors that can drive performance - like individual, team and company goals - and making choices about how you’ll balance and recognize these different factors.
"Your reward system should reflect your organization’s culture and values." (Click to Tweet!)
Step 2: Set expectations
Transparency around reward processes provides the framework for ongoing performance feedback. It helps people understand what they’re doing well and where they need to improve and gives them confidence that everyone else is being measured against the same standards.
"Transparency around reward processes provides the framework for ongoing performance feedback." (Click to Tweet!)
Step 3: Calibrate to fairly evaluate
Calibration is about putting performance decisions in context and removing the isolation of single manager decisions. It brings groups of managers together to discuss individuals’ progress and share insights, giving each employee fair consideration.
Step 4: Formalize coaching cadence
One of the lessons to take from companies that have eliminated annual reviews is the integration of feedback into everyday conversations between managers and their team members. Starting with a formal coaching cadence - at minimum once a month - helps set this new cultural expectation.
Step 5: Deliver feedback constructively
We know people want feedback, but it can still be hard to hear. So delivering feedback in a way that helps people hear it constructively is essential. This means separating it from conversations about rewards and promotions and keeping feedback, especially peer feedback, for coaching conversations.
"Delivering feedback in a way that helps people hear it constructively is essential." (Click to Tweet!)
Step 6: Refine for ever-better performance reviews
With any new process, it’s pretty rare to get things 100% right the first time round, perhaps even more so for major cultural change. So getting feedback from all levels of the organization on your new process is essential for learning what is going well and what still needs work.
A culture-first approach to performance management
There’s no easy fix for performance management, but with these six steps you can create a fairer, more effective process that promotes rather than stifles your culture. Setting up the process the first time around does take some work, but it’s well worth it, and better than wasting your time on a process that doesn’t work. For more information feel free to download our free ebook or get in touch with one of our people geeks.