Thirty of the Fortune 500 listed companies ditched annual performance reviews in 2015, according to the Harvard Business Review (November 2016). While it’s a marginal shift by only six percent of companies, it’s a trend that has sparked debate over whether formal performance reviews are still relevant for organisations and staff.
Razor Suleman, founder of Achievers – a $100 million enterprise software company headquartered in Toronto, Canada – describes the annual review as “a relic of the pre-electronic past”. He says a far more productive way of giving useful feedback is to have frequent coaching conversations, rather than one formal review a year.
One company that has evaluated its performance management approach and decided to continue with formal reviews is Facebook. Head of People at Facebook, Lori Goler, told the Harvard Business Review that without evaluations, people are left in the dark about who is gauging their contributions and how.
Facebook adopt a company-wide approach to performance evaluations. They start by encouraging staff to write evaluations to mitigate bias. These are shared with managers and other staff and reflect the company’s core values of openness and transparency. Managers then write the performance reviews and a team of analysts evaluate them for bias (with the manager’s name taken out of the equation). Ratings are then translated into compensation.
While the debate about the effectiveness of annual performance reviews continues, we believe there is a place for regular performance reviews within New Zealand businesses – and success usually comes down to a senior manager’s ability to do it right.
Performance reviews provide a unique opportunity for employees to understand their strengths and shortcomings. But above all they should be a two-way discussion that is productive for both parties. Some of the ways you can make a performance review more engaging is by having a deeper conversation with your staff to find out what drives and motivates them, what they like or dislike and what ideas they may have for improving your business.
Asking lots of questions and listening to your staff will not only make them feel valued but in the process you may discover new skills or interest areas which could have a positive impact on your business. Performance reviews can also be a great time to reengage with staff about opportunities for future growth and career development.
Telling staff how their work fits into your company’s overarching business strategy may seem trivial but for some it helps give meaning to their work which can be a core motivator for improving performance. While you’re at it, be clear about what your evaluations are based on, what is being measured and how improvements will be noted moving forward.
Whatever you think is best for your organisation, it is important that a performance rating system does not become a substitute for meaningful conversations with your staff. Regular check-ins about performance and aspirations is an important prelude to annual performance reviews.
Our highly skilled consultants advise our clients on all employment matters but if you want to brush up on your performance review strategy while building a culture that recognises and rewards growth, contact us today.
The Decipher team