The workplace is evolving. It is becoming more digitally dependent, global in outlook, diverse in structure and social media savvy. Today’s workforce is speed driven, cost efficient-minded and demands results in real time. In that regard, experts are beginning to interrogate the relevance of performance reviews still being employed by organisations’ Human Resource (HR) department.
By way of definition, a performance review also known as performance appraisal is a formal discussion about an employee’s development and performance. It can also refer to the process by which a manager or consultant examines and evaluates an employee’s work behaviour by comparing it with preset standards, documents the results of the comparison, and uses the results to provide feedback to the employee to show where improvements are needed and why. In most organisations, the performance is an annual tradition.
Taking literarily, performance reviews helps an organisation determine which employee needs what training, the ones to promote, demote, retain, or simply fire. It is no surprise therefore, many employees look forward to appraisal periods with either fear or elation.
The anxiety is usually top-notch. In most cases, employees who think they have not done well and could face sack, voluntarily resign ahead of the day, whereas the review feedback could come out different. In that case, a big disadvantage of reviews is their heavy emphasis on financial rewards and punishments and their end-of-year structure. They also hold people accountable for past offences at the expense of improving current performance and grooming new talent.
Another disadvantage of reviews is that it cost an arm and a leg to complete. Rajeev Behera CEO of Reflektive gave an estimate of what companies are likely to spend when carrying out performance reviews. Using specific metrics, Behera arrived at $200,000 as the expense a company of 500 employees, for instance, dedicates to annual reviews. That estimate is not inclusive of time, human relations (HR) resources or third party consulting or service fees to process and analyse data or work opportunity cost.
Explaining in its 2016 HR Report, why it was rethinking its performance review, Deloitte noted that the process was “an investment of 1.8 million hours across the firm that did not fit our business anymore.”
Accenture which has also dumped and redesigned its annual performance reviews said they had to spend over 2 million hours at the cost of hundreds of millions of dollars for every time they carried out the process. Most of the times were spent discussing ratings instead of actually talking to employees about their performance.
“We are not sure spending all that time on performance management has been yielding a great income,” Pierre Nanterme, CEO of the company said in 2016, “Performance is an ongoing activity. It is every day.”
At accounting firm, PricewaterhouseCoopers LLP (PwC), performance reviews was a lengthy process that involved employees negotiating assessments with bosses. PwC eventually redesigned the process to what it now calls “snapshots”. Snapshots refer to short, frequent reviews that rate employees on five characteristics including leadership ability and business acumen. Bosses are allowed to give about two minutes snapshot to employees any time they request for it.
Business researcher, Josh Bersin estimated that nearly 70 percent of multinational companies are slowly but consistently moving towards regular conversations about performance and development in order to change the focus to building the workforce that is competitive in both today and years from now.
In its 2017 Global Human Capital Trends, Deloitte predicted that the future workplace will have to rely more on continuous feedback, hence have little need for annual performance reviews. The company also said that there is evidence that the “new rules” of performance management are understood and working well.
According to Deloitte, employees want more regular feedback. Informed by experiences in social media, people want to get and give more feedback regularly.
Nanterme of Accenture described the shift this way “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 the feedback. Now it’s all about to get that feedback. Now it’s all about instant performance engagement.”
Hundreds of companies, Deloitte said, are already experimenting with new performance management processes. The companies include Adobe, IBM, Goldman Sachs, and Cisco among others.
At first it would be difficult for some workers and managers to adjust to the daily feedback system that does not end up generating compensation for participation, says an expert. However, Elizabeth Reed, a vice president at Goldman Sachs, one of the companies that have dumped performance reviews, said it forms part of the picture of how a manager sees an employee.
