How Did Performance Reviews Become Unfashionable?
You’ve probably heard me say that, for all the complexities and nuances of human interaction, people’s needs are pretty simple. They want to know three things when they come into work each day:
- What are your expectations of me?
- How am I performing against those expectations? and
- What does my future hold?
As a leader, you need to give your people clarity on those three questions.
There are many ways to do this: the conversations you have, both formal and informal; how you set their targets and KPIs; how you articulate the standard they need to meet; the constant, informal, micro feedback you give them to help calibrate their performance.
And then, there are annual performance reviews. These provide a structured process for you to discuss, amalgamate, and formalize all of the feedback from the previous period, and record it in a quantitative fashion. In my experience, these are essential!
Why is it, then, that some companies are moving away from annual performance reviews:
- Well, for start, they’re time-consuming, and they’re costly
- Leaders hate doing them
- People hate being subject to them
- Both parties dread the potential conflict or criticism, and would rather avoid it.
Some companies, which I suspect are led by people who have never mastered the art of strong leadership – or who don’t see leadership as a fundamental driver of value – have decided it isn’t worth doing formal performance reviews.
How do they justify it? For many, they’ve decided that the benefits don’t outweigh the costs. So, what do they do instead? They rationalize that, instead of formal performance reviews, every leader will give their people comprehensive and timely informal feedback.
What a load of bullsh!t…
They’re effectively saying, “We don’t have confidence that our leaders can give feedback competently, so we’re going to adopt a new approach – an approach which relies on every leader being able to give feedback competently!”
Am I the only one who sees the irony in that?
Let’s face it, if leaders were already doing their jobs properly, performance reviews would, indeed, be highly valuable. The daily-to-day feedback which is part of the leadership dialog would simply feed into the formal assessment and scoring in the annual review.
There would be no surprises, because every leader would be coaching their people throughout the year. But, if there was even the smallest likelihood that the leaders were capable of that, the formal review process wouldn’t be such a problem in the first place.
So, instead what happens is… oh yeah… nothing!
People don’t know where they stand; the company has no visibility of its performance drivers; the culture is impossible to change in even the slightest way; and talent management becomes an opinion-based game of personal relationships that undermines the meritocracy.
When done competently, performance reviews fulfill a few very important functions:
- They provide a structured environment for people to receive feedback, and close off the continuous loop of informal feedback they receive throughout the year;
- They enable leaders to assess performance, in order to allocate discretionary incentive awards
- They provide a templated process for training inexperienced leaders in how to hold a high quality feedback conversation, because formal performance standards give a de facto script to follow
- It helps you to establish the performance bar for each individual; and
- It allows senior management to calibrate performance across business units, teams, and functions… because, let’s face it, we all know different leaders are more or less diligent when it comes to assessing their people’s performance.
The continuous feedback of a healthy leadership dialogue keeps people on track: in my experience, though, this is necessary, but not sufficient. Formal performance reviews have many benefits that are worth every cent you spend… if you value leadership, that is!