Are annual reviews a thing of the past?
As the calendar year draws to a close, managers and employees typically gear up for a largely unpopular end-of-year tradition: the annual performance review. As is the case with most things in 2020, however, this year may be a bit different.
Continuous performance management—a model that involves frequent feedback and goal-setting conversations among managers and employees as opposed to more static, once-a-year assessments—was already on the rise before this year. But among the changes necessitated by the pandemic and its remote-work mandate was a natural trend toward more frequent check-ins—paving the way for many employers to shift performance management away from a “check-the-box, administrative task” to a more development-focused practice, says Rosette Cataldo, vice president of performance and talent strategy at Workhuman, which provides cloud-based HCM software.
They realized “it was critical to their success and the wellbeing, productivity and engagement of their employees if they connected more often, which is the foundation of continuous performance management,” Cataldo says.
In fact, in 2020, Workhuman saw a 152% increase in the number of one-on-one check-ins through its continuous performance management platform Conversations. While check-ins—usually short, frequent meetings—often involve managers offering feedback to reports, they can also cover short-term goals, insights delivery, career discussions and mentoring. And, check-ins can involve the whole team.
“By creating an open system of peer-to-peer feedback and the easy sharing of goals,” she says, “employees can get many voices as input in real time. This is a good thing, as one voice always creates opportunity for bias. Many voices, when collected, can be reflected upon by the employee and even shared, so when a manager review does occur, it includes insights from multiple sources.”
That approach is predicated upon the concept that feedback about performance and goals shouldn’t be focused on the negative—a departure from more traditional strategies that took a reflective, often corrective, look at the employee’s work.
Positive recognition, praise or even just recommending an employee continue what they’re doing because it’s effective “should all be flowing regularly to the employee, as well as feedback that you may want to ask the employee to consider doing something differently next time,” Cataldo says. “More than ever, the focus is on today and tomorrow versus yesterday when it comes to feedback and a simple, easy way to privately share those insights with the employees will transform the culture and develop your employees ongoingly.”
Simple has been a key word for performance management in 2020, adds Josh Bersin, industry analyst, dean at the Josh Bersin Academy and a columnist for HRE.
“Most companies have relaxed the rating process and reduced the number of ratings,” he says.
In recent months, performance management has become more focused on employee wellbeing and support—and less on evaluation and assessment, he says.
PepsiCo and AB InBev, for example, radically simplified the number of talent reviews they used, to save everyone time, Bersin says, while the World Bank took the entire year off from its performance management process.
Such efforts represent the “badly needed reinvention of performance management that many companies were trying to do prior to the pandemic. “
Likewise, many employees have grown discontented with traditional once-a-year appraisals, along with clunky processes—prompting some organizations to place more value on the employee experience aspect of performance management, says Cataldo.
“That has begged the need to reevaluate and revamp many of the administrative-heavy systems previously used to share feedback, check in, create goals, provide insights, assess, evaluate and even how we collect ratings or assessments,” she says. “Companies are shifting toward one simple, unified approach and one system to do it all; the key part is that the system was created with the employee’s needs in mind versus the needs of HR.”
HR has, however, typically relied on end-of-year reviews to guide compensation decisions.
Yet, according to a Workhuman study, Cataldo says, annual raises and lump-sum bonus payments have proven ineffective at driving performance improvements—with any gains only lasting a few weeks. And this year, Bersin notes, many organizations increased pay periodically anyway because of all of the extra stress and hours people are working.
“While performance is still important, the pandemic has taught leaders to focus on the most important activities and initiatives and spend less time worrying about the intricate details of who gets what rating,” he says.
But not all organizations are completely abandoning the once-a-year review. Many Workhuman clients that will continue that approach, Catalado says, have built it into a wider context of continuous performance management. And the tone of the end-of-year conversation is changing, with more focus on planning, discussing shared purpose, identifying development areas and setting goals for next year—as opposed to “Let’s talk about all that you did or didn’t do in 2020,” she notes.
“If your culture supports the annual review, our advice would be to consider adjusting the tone and focus of this year’s annual discussion to forward-looking planning and the success achieved during COVID versus a long-winded, rearview review of 2020,” Cataldo adds. “This human approach will undoubtedly go a long way in preparing for 2021.”