As we march headlong into the new year we have probably had, or are about to have, the dreaded annual performance review. The truth be told that here at Optimize we are not big fans of the one-off annual performance appraisal although we are very strong advocates of recognizing and addressing performance.
The problem with one off performance reviews are significant:
• Employees need and want regular feedback (daily, weekly), so a once-a-year review is not only too late but it’s often a surprise.
• Managers cannot typically “judge” an entire year of work from an individual at a given point in time – it’s an ongoing process throughout the year. Typically great stuff achieved in February is forgotten and the focus is on the slip up the employee made in November…..
• While some employees are a poor fit and likely are poor performers, these issues should be addressed immediately, not at the end of the year.
• People are inspired and motivated by positive, constructive feedback – and the “appraisal” process almost always works against this.
• The most valuable part of an appraisal is the “development planning” conversation – what can one do to improve performance and engagement – and this is rarely done well and is often left to the last five minutes of the appraisal meeting.
The obvious answer then is to do away with the whole thing and find a better way but companies are nervous about eliminating this process because:
• They need a fair and validated way to distribute compensation increases
• They need a formal record of poor performance when considering letting someone go
• They need to capture performance data in an employee’s profile for future promotion and other talent reviews, succession plans, development plans, and career migration
• They need a way to ‘make sure’ that people are doing their jobs well.
But there has to be a better way and here’s why. Organization structures have changed and companies need to be more agile. There is a shortage of key talent and the keys to success now focus on regular alignment, ongoing coaching, creating passion and engagement, and bottom up goal setting. The business world is much more complex and the old top down style of objective and goal setting is no longer the best way to ensure an uplift in corporate performance.
So how might we go about doing things a bit differently?
• Set and reset goals frequently. Companies that set performance goals quarterly generate 31% greater returns from their performance process than those who do it annually, and those who do it monthly get even better results. This means employees get feedback on a continuous basis.
• Develop a “feedback-rich” culture and a set of tools that encourages all employees to give each other feedback.
• Talk about performance regularly (weekly, monthly and at the very least quarterly on a formal basis) and let employees create their own goals on a regular basis by providing them a thorough understanding of the companies vision, purpose, KPI’s and priorities
• Ensure that there is a dialogue about expectations and the match between their self-assessment and that of you and of the organization.
• At least half of the meeting should be spent on forward looking conversations and based on the context around the strategy and priorities of the company.
• Negotiate SMART objectives. Setting goals without negotiation will not achieve buy-in, commitment or ownership – they will be your goals not theirs.
• Always ask for feedback on your own leadership performance – are you meeting their expectations?
As we work alongside clients it has become clear to us that the traditional appraisal has to change. Businesses thrive on agility, speed, commitment, accountability and alignment. The process of driving and measuring performance has to do the same.