1. Annual performance reviews and ratings are a broken system
Extensive research has absolutely destroyed the idea of unbiased rating systems. Even when managers and organizations are aware of biases, organizations such as Google and Deloitte found that the significant time investment in conducting the reviews and calibrating ratings still provided ratings that reflect more on the raters than on the actual employee performance. Most managers and employees know this intuitively and this is one of the reasons that the annual reviews are often viewed with such skepticism. The other significant issue with a single annual performance review is that a major portion of the review is backwards looking, evaluating performance from the past 12 months in a way that does not promote forward thinking. Some systems may try to asses for competencies, skills or values—but even this is usually only measuring the potential for a skill or behavior, and doesn’t reflect the current productivity or level of employee engagement at a point in time. Deloitte University Press has a complete article on the brokenness of annual performance review and rating systems.
2. Continuous performance management improves productivity and employee engagement
The Harvard business review points out that GE has successfully used “touchpoints” between employees and managers to significantly improve productivity. They claim their pilot test of a new system improved productivity fivefold in the twelve-month test period! As a result, GE is replacing their legacy employee management system across the company with a new continuous feedback system. To read more, click here. The early and frequent feedback offered allows managers to coach their staff through challenges and opportunities.
When Success Factors Modified their performance management software to include the capability for continuous performance management, the independent magazine for SAP professionals quoted NTT DATA senior vice president of human capital, Megan Masoner Detz, saying that all generations in the workforce—not just millennials—respond positively to regular feedback that recognizes outstanding performance and identifies areas of improvement.
These new systems of continuous feedback also give employees more ownership over their own goals and progress, with the ability to track and document progress and share results with their managers.
3. Availability of disruptive technology
There has been a flood of disruptive technological solutions to enable companies both big and small to engage in continuous performance management. Halogen, Success Factors, 7Geese, BambooHR and Clear Review are just a few of the tech solutions that have come out in 2015-2016 with new solutions to address continuous performance management. In HR Technology for 2016: 10 Big Disruptions on the Horizon by Josh Bersin of Deloitte, Josh names one of the 10 as the reinvention of performance and goal management with feedback and check-in as a significant disruptor for HR systems. The disruptiveness of the systems includes a focus on staff and manager experience, rather than on HR users, and the prevalence of the applications of many of the systems. The choices are expanding rapidly. Larger ERP systems are struggling to catch up to the more agile start–ups who have taken a share of a significant piece of the new performance management landscape.
4. Other companies are doing it!
Adobe, Cargill, GE, Microsoft, IBM and Accenture are all prominent organizations who have eliminated and/or replaced the annual performance review with continuous performance management. These organizations empower their managers to manage staff effectively, often using “check–ins” and frequent feedback processes rather than a single review form. Adobe has reportedly made this approach part of its culture and saw voluntary turnover decrease by 30%. Clear Review describes that Cargill saw employee engagement levels improve significantly with 70% of their employees now indicating they feel valued. To read more about this, see Clear Review’s article.
More companies are about to make the changes. In 2014, fully 70% of respondents in a survey by Deloitte said that they are either “currently evaluating” or have recently “reviewed and updated” their performance management systems.
If your organization wants to stay competitive and improve employee engagement, you don’t want to be the last ones sticking to your outdated annual performance appraisal and ratings system. The options available to transform your system are multiple, depending on your size and budget. The best systems incorporate one on one discussions between managers and employees, continuous goal setting and innovative technological solutions with incredible employee interfaces often available on a mobile platform. Integrated systems that combine HRIS and applicant tracking with performance management options are also emerging. Even smaller employers have access to agile and innovative cloud–based solutions that didn’t exist a year ago.
One small caveat—it seems like many of these systems are still changing and improving with frequent updates. Be prepared that if your organization makes the change to one of the new technological solutions, that you may also be signing up for a bit of continuous change for your continuous performance management in order for your organization to continue to be able to take advantage of the development improvements and tweaks the new systems want to offer for the future!
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