Why You Should Invest in Performance Development, Not Annual Reviews
As we head into the end of the year, many leaders are gearing up for more than just Annual Planning and holiday celebrations - many are brushing off their systems and processes for yet another round of annual performance reviews. According to a research paper from Gallup entitled Re-Engineering Performance Management,"Traditional performance management systems are broken. Companies, leaders, managers and employees have long participated in time-consuming, frustrating performance reviews that have not yielded clear improvements in individual or organizational performance.” Ineffective annual reviews also hit your company’s bottom line: "The cost of lost time spent on traditional approaches to performance evaluations alone is estimated to range from $2.4 million to $35 million per year for a company with 10,000 employees.” It is time to consider ditching the laborious annual review process. But, many leaders aren't sure what to do in its’ place.
According to Gallup, there are 5 top reasons that the traditional annual review process is problematic:
- It happens too infrequently to provide meaningful, actionable feedback.
- They typically use vague ratings or rankings that provide no clarity on how to improve.
- They are perceived as unfair and heavily influenced by their managers’ bias.
- Negative reactions to performance ratings and rankings can demotivate team members.
- The close ties to pay incentives for most annual reviews adds to
anxietyand detracts from meaningful conversations about career development.
Clearly, there are some real problems with most traditional annual performance review processes. The very system that was initially designed to motivate employees to improve their performance actually has the reverse effect, demotivating team members and sucking up valuable time and resources from your managers and leaders.
However, skipping annual reviews leaves some unresolved questions for leaders:
- How can we provide necessary feedback for employees, clarify expectations, and recognize accomplishments?
- How can we create opportunities for them to reflect on their performance and future developmental needs?
- What system should we use to make decisions about pay increases and promotions?
Gallup recommends re-engineering your performance management system into a performance development system in which your managers become coaches and offer ongoing feedback. They suggest "creating a culture of performance development” around three key areas: 1. establishing expectations, 2. continually coaching, and 3. creating accountability.
Here’s how you can replace the aspects of your annual performance review with a new system that aligns with Gallup’s recommendations:
- Create Job Scorecards for all team members. Doing this will help you set clear expectations for the success of each role in your company, complete with KPIs for all desired outcomes of each role that have Red-Yellow-Green success criteria. Once you’ve done the work to create the Job Scorecards, revisit them frequently to help you have drama-free performance conversations with your team members and to avoid scope creep and burnout on the team.
- Implement dashboards. Having your team track their weekly progress on their most important priorities and KPIs on a visual dashboard lets you have performance conversations in real
time,when needed. You can see when someone is struggling beforeit is too late, and you can coach them at the right time to help them make adjustments and be successful. Rather than waiting until the end of the year or the end of the quarter to find out how they should have done something differently, you can intervene with the right questions and the right guidance at the right time. Updating a Red, Yellow, or Green status each week will also promote self-accountability; A Players on the team will manage themselves away from Red on a clearly defined priority.
- Have Weekly Team Meetings. This is another great way to provide continuous coaching to your team, and a great forum for your team to develop some of the skills they may need for possible future roles. Having weekly
discussions asa team about how to get struggling priorities and KPIs back on track is a great way for the team to flex their own creative-thinking, problem-solving and coaching muscles. These weekly adjustment meetings are another tool for enhanced accountability; nobody wants to come to the team week after week with the same unresolved issues.
- Maximize Your Time. As a leader or manager, using a tool like
Rhythmsoftware will give you instant visibility into your team’s performance, saving you time on status updates and chasing down information on your team’s most important priorities. Take all the time you will save from skipping annual reviews and hunting for information to focus on having those important, meaningful, future-focused developmental conversations with your team - you know, the ones that will actually help motivate them to succeed. Spend one on one time with your direct reports coaching them to improve performance and work toward their individual goals. We have a Performance Coaching tool that can help you guide those discussions.
Hopefully, this has given you some food for thought as you consider your own performance management system. Whether you go with a more traditional annual review process or shift to a model that’s focused on continuous feedback and development, Rhythm is a great tool to support your performance management efforts.