The Annual Review Process is Broken. Here’s How You Can Fix it.

New approaches to the process empower managers to align workers’ goals with business priorities.
By: | October 23, 2018 • 4 min read
annual review process

For some time now, there has been a dissonance about the best way to evaluate employee performance while also keeping them engaged and productive. Research has routinely found that once a year, bi-annual or even quarterly check-ins aren’t enough. What’s needed to properly assess employees and ensure they’re engaged in their performance is continuous performance management—a term that has led to some confusion and mistakes in implementation.

According to industry experts, the drawback to the term continuous performance management is that it paints an “always-on” mentality for managers and places unnecessary burden on them to be the sole provider of employee feedback.

“That’s the wrong approach—it’s important for employees to have continuous feedback, and the way that you implement it is critical,” says Sari Wilde, vice president of the HR practice at Gartner. “If you place all that burden on managers it won’t happen—employees will get the wrong kind of feedback.”

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She adds that skills, requirements and jobs are changing rapidly, which requires continuous feedback, but this shift isn’t just for managers. Everyone must be on board to make a successful transition to continuous feedback.

According to Doug Dennerline, CEO of BetterWorks, continuous performance management isn’t just repackaging the dreaded annual review by conducting it more often. Instead, continuous performance management focuses on goal setting and alignment to business priorities.

“We all know that the annual review does not work to improve performance, nor does it deliver needed business outcomes of the development and retention of top talent,” says Dennerline. Continuous performance management flips the annual review on its head, he says, by replacing a once-a-year headache with an ongoing cycle of lightweight, timely conversations between managers and employees around what matters most: Goal setting and alignment to business priorities (at least quarterly), feedback and coaching from managers and peers, career development paths and recognition of their impact on the business.

Enabling Continuous Feedback

At Workday, the performance management culture shift has been underway for a few years. Cristina Goldt, vice president of HCM products at Workday, says the company calls the reformed process “performance enablement” and leads by example—it uses its own software internally to turn practice into reality. She says that annual reviews, by design, look at the past, but performance enablement looks to the future.

“With performance enablement, you can look at where an employee wants to go and where the organization is heading,” says Goldt. “From there, you can easily align the two to help facilitate the appropriate steps to move an employee, and the company, forward.”

Performance enablement is designed to put control back into the employee’s hands. Indeed, they can initiate a conversation without waiting for their supervisors, thus alleviating some pressure from the manager’s shoulders.

For any such program to be truly effective, however, managers need to learn their place in the hierarchy of performance management. According to Wilde, Gartner research finds that the most effective leaders are what Gartner calls connector managers.

“These managers provide targeted feedback and coaching based on employee’s needs, but then they do something that’s unique,” says Wilde. “They connect employees to other individuals and opportunities for the right kinds of development. When someone isn’t positioned to provide that feedback, a connector manager actively connects employees to the right kind of coaching and development opportunities, instead of trying to do it themselves.”

She also notes that connector managers have a greater impact on talent outcomes. Gartner has found that connector managers increase the impact on employees’ engagement by up to 40 percent, intent to stay at the company by up to 20 percent and discretionary efforts by up to 38 percent.

Michael Rochelle, chief strategy officer and principal HCM analyst at Brandon Hall, says it’s also imperative for managers to understand what employees are taught for continuous performance management to be successful.

“Most organizations don’t have a strong connection between knowing the curriculum and the objectives of learning for employees,” says Rochelle. “When managers understand what their employees are learning, they are in a better position to coach an employee or suggest other learning. And turning managers into great coaches and mentors is a lynchpin for a great continuous performance management program.”

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Getting managers on the right path involves development and enablement, and the first phase is to get managers to realize their strengths and weaknesses. From there, managers need to identify connections throughout the organization so that they are ready with recommendations for mentors for their peers and direct reports.

Continuous Performance Management Challenges

Of course, this momentous shift from once-a-year check-ins to continuous feedback isn’t without challenges. One of the most common obstacles is determining whether the annual review should be scrapped altogether.

Despite the trend toward continuous PM, Rochelle says, the annual review is still an important occasion.

“It’s the seminal moment for a lot of organizations,” he says. “It’s a time when managers can tell an employee ‘You’ve reached all of your goals and exceeded them; therefore you get a merit increase, or we’re promoting you.’ ”

Betterworks’ Dennerline echoes this sentiment, noting that strategic activities like compensation review, calibration discussions and succession planning are often tied to an annual review.

“But having rich, up-to-date insights about employee performance, development goals and feedback only enhances these downstream activities,” he says.

Additionally, how an organization manages performance has a major impact on business success.

“Continuous performance management can ensure teams are working on what matters most to the business today, individuals are actively developing their skills to meet tomorrow’s challenges and the business develops an environment that sustains high performance and retains top talent,” says Dennerline.

Another challenge companies face is the lack of performance management for teams. Rochelle says that while many individuals may have a performance plan, team performance plans are lagging.

“Companies need to tie development processes and continuous performance management processes to the fact that more and more things are being done in a team environment,” says Rochelle. “Currently, organizations reward individuals for doing well, even if the overall team isn’t.”

He says the best thing to do when shifting to a continuous performance management program is to think big but act small. The idea is to move from once a year and to slowly and surely break down increments of feedback into smaller and smaller pieces.

“I’m not a fan of saying … ‘Just get rid of annual reviews.’ It’s an oversimplification of the issue,” says Rochelle. “What really needs to happen before anything else is to ensure managers are good coaches and mentors by preparing them to be coaches and mentors.”

Danielle Westermann King, staff writer for HRE, received her bachelor’s degree in English from Temple University. She has written and edited articles for various print and online healthcare publications and is now setting her sights on human resources. She can be reached at [email protected]

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