Companies Need to End Individual Performance Reviews
Consider for a moment we are sitting in the audience of a symphony orchestra. They are playing ..
You listen to them play and now you are given a score card to rate them.
You now have to pick one of the musicians and choose which one is the best. Which one would you choose? Who is the best? Who performed the best out of everyone? Who rose to the top? Who represented the orchestra in their behaviors better than everyone else? Who didn’t belong?
There is a team dynamic and team or group performance where everyone depends on everyone else for success. We live and work in a world of inter-dependencies. It makes sense to look at individual performance, but not in the archaic way that many companies still do. As we move to agile methodologies beyond software development, we must consider group or team performance over individual performance. Individual performance is divisive, stressful, and seemingly punitive.
Let’s say January 5th someone does something outstanding, it makes no sense for an organization to reward that person at the end of that year. By the time the end of the year happens, so many other things have happened, and it may snuff out the unbelievable thing the person did in the beginning of the year. Many companies try to combat this issue with spot awards or some form of gamification, but this is not effective. The extreme 360’s don’t work either.
When I was at Booz Allen, I spent 40+ hours studying and reviewing my peers. I had to come up with a presentation to a Joe Smith Mock committee brief V2. They (Booz Allen) realized this was a terrible process that cost the company untold amounts of dollars in labor with limited positive results. Kudos to them for getting rid of performance reviews. Accenture saw millions of dollars wasted in costs associated with performance reviews as well. They also got rid of their reviews and moved towards periodic refection points and future focus.
Costs:
TIME – Estimates from large companies are in the 100k plus in hours spent on reviews. Adobe estimated it could save 80k hours from 2000 managers.
MONEY- Money in time spent on the past vs. the future, attrition, attraction for younger employees. The estimated cost for the entire performance review process of a company with 10,000 employees is roughly $35 million.
EMPLOYEE MORALE- Jack Welsh’s 10% rule was absolutely ridiculous and why companies adopted “Rack and Stack” is beyond my comprehension. It makes sense for people to compete with each other, but not at the cost of the business as a whole. This employee morale subject is at the core of many organization issues today. The lack of understanding of human factors is harmful to the employee and the organization. One of the partners at Booz used to say, “If people don’t like what I am doing, they will show me with their feet.” Not long after that statement, many danced their way out of there and he was left scratching his head as to what happened.
What Should Companies Do?
- Constant and consistent feedback loop for employees and organization. Focus on feedback in the moment and allow for leaders to reward employees immediately.
- Team or group feedback and measurement. Individuals should get feedback all year long and teams should also get feedback and rewarded as a team. If people on the team aren’t doing what they are supposed to do or carrying their weight, leaders will know quickly. The team will pressure the individual.
- Reward and pay increases are budgeted by the organization and leaders are given a yearly amount that they can use all year to adjust, change, or reward their team.
It really is simple. Companies want to lower costs and keep morale high. They simply need to shift performance to being part of every day activities. There should not be any additional competition introduced for employees. There shouldn’t be a percentage of employees that get something while the others get nothing. It should be fair and equitable through normal operations. Level set expectations and treat people with respect. They will respect you and they will be loyal as they learn, understand, and provide feedback to make the system better.
What do you think?
The Cohenization Project 
Hi Howie. As with most things, even the best human factors based construct only works as well as its implementation. Managers must be well trained- not only in delivering timely and actionable feedback and coaching to staff, but also in fostering a culture of peer-to-peer feedback and real time conflict resolution. Employees must learn to conduct difficult conversations at a peer level both as part of developing the skill for the future (as a manager) and building trust among team members. We have so much to learn from one another, especially when it comes to performance improvement and team dynamics.
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Much needs to be re-invented about performance review and agree that yearly check are things of the past. While I do not see them going away soon, I see two main phases; First phase in line with your blog is the focus on team collaboration. An example is Microsoft who changed its performance and development process several years ago with a quarterly check point adding collaboration as a measure, though still yearly financial rewards. See a short video from an interview I gave at the World Bank. https://vimeo.com/130224301
Second phase is the use of personal digital footprint associated with AI system. This journey will be hard because of biaises but eventually can provide better knowledge for companies to deal with that. In that phase I see the role of the manager will have to transform.
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