No More Performance Reviews?

Is the annual performance review a thing of the past?

"I'm not dead yet." Plague victim in Monty Python's Holy Grail

Recent books, articles and interviews making the rounds in the HR community have announced that "the performance review is dead". Is this an accurate description of a real phenomenon or just the latest HR buzz?

performance review is dead?

The authors in the "performance reviews are obsolete" camp make the argument that the process of performance reviews is costly, time-consuming, psychologically difficult for both those being reviewed and those doing the reviewing and the effort results in little in terms of improved performance for either individual employees or their organizations. And there is some real data that, at least partially, back these opinions. Our extensive experience in conducting surveys for hundreds of companies large and small indicates that there is, indeed, something wrong with the performance review process at many organizations. Less than half of US employees (44%) are highly satisfied overall with the performance review process at their organization. But does this mean that the process itself is flawed? Should companies strive to improve their review processes? Or should they scrap them altogether?

An important point in any discussion of performance reviews is that there isn't a single version of the process out there. Organizations vary widely in the systems, procedures and measurements they use during reviews and in the stated and unstated goals of the review process. Critics of performance reviews often describe a "straw man" version of the process that includes supervisors doing mindless ratings of employees via simpleminded scales and rank orders, with little dialog between the rater and the person being rated. It is easy to attack this sort of straw man, but it's relevance to the HR discussion is limited - no one wants their organization to follow this model and most believe they do not.

Deciding whether to improve or toss performance reviews is dependent on having a genuine and honest conversation about why your organization does reviews in the first place. Typical stated goals of the review process include identifying employee strengths and weaknesses for coaching/improvement, spotting candidates for training and advancement, aligning employee efforts with organizational goals, discussing employee career paths and deciding the award and amount of bonuses and pay raises. Unstated goals may include weeding out employees that are seen as poor matches to the work culture or the supervisor's biases. But not all organizations do all of these and not every organization that states a performance review goal such as "career paths" is actually committed to that goal.

Our research and experience - including reading thousands of written comments from employees across virtually every industry - suggests that dissatisfaction with the review process doesn't result from inherent problems with the process itself or even with its details (ratings vs. no ratings, tied directly to pay vs. separate from pay review, etc.). The issues arise when there is a mismatch between what the differing parties involved want and expect from the process. If, for example, a small organization sets the expectation that performance reviews will include discussion of career paths and training opportunities, but there are no opportunities for promotion and no training budget, employees are bound to be dissatisfied with the process and supervisors will probably feel it is an uncomfortable waste of time. In contrast, a sales-driven organization that clearly states that reviews are about bonuses and nothing more may find employees are highly satisfied with the process, as long as they perceive the measurements used are fair and/or objective.

We feel the decision about what, if anything to retain, dump or change about performance reviews should be based on figuring out what your organization wants and needs in terms of the dialog and relationship between the organization and the individuals who work there. Don't use measurements, models, systems or processes just because they sound good or work well at other organizations. If you are one of that 44% of organizations where employees are highly satisfied with the review process, you're doing it right. Most likely you have a process that matches your work culture, is communicated well and that meets the needs of employees and the goals of the organization. Would you really throw that out just because someone told you the performance review is dead? Especially when the "dead" review process may bear little resemblance to the version at your company?

If your company is a member of the less satisfied 56%, however, the "ditch the review" camp may have some ideas for you to consider. Getting rid of a bad process, or the bad parts of a so-so process is almost always worthwhile. The suggestions of these authors about how to develop better team collaboration, getting rid of some of the more objectionable hierarchical aspects of reviews and encouraging two-way communication are valuable. But be wary of adopting wholesale a solution that may not be a good fit. What works in someone else's software development lab may not be completely adaptable to your oil field services company.

Because the reasons organizations do reviews are not going away, we feel that in one form or another, under one name or another, performance reviews are not really going away, either. We urge you and your organization, as we urge our clients, to construct and conduct them thoughtfully. And whether you call them performance reviews, collaborative dialogs or something else, we feel about performance reviews the same way Mark Twain felt when he read his own obituary, "Reports of my death are greatly exaggerated."

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