The Annual Performance Review is Dead: Here’s How Progressive Companies Are Doing it

Have you ever met a manager or an employee who either enjoys or finds value in the annual performance review process? It’s not likely.

According to a study done by SHRM, as many as 72% of companies still conduct yearly reviews, despite 87% of managers and employees finding them ineffective.

It makes sense then that many fortune 500 companies such as General Electric, Microsoft, Accenture, and Adobe are getting rid of the Annual Performance Review altogether.

Instead of doing a catch-all performance review at the end of the year, they’re opting for consistent feedback and coaching conversations throughout the year.

Indeed, rather than making their reviews based upon past performance, their reviews have become forward-facing.

At The Gap, for example, they do monthly coaching sessions between employees and management — something that is internally known as the “GPS” (Grow, Perform, Succeed).

The idea is simple: They want to constantly be there to ensure that their employees are going in the right direction just like a GPS in your car would.  

As their Senior Director of Organisation Performance Effectiveness, Rob Ollander-Krane explains it, 

“A GPS system doesn’t wait until the end of the trip to tell you all the wrong turns you made. We didn’t want to handcuff our managers and make them wait until the end of the year to give performance feedback. We wanted them to give performance feedback all along the route, so employees didn’t get too far off the correct path during the journey.”

Interestingly, Pierre Nanterme, the Chief Executive at Accenture said something similar, 

“People want to know on an ongoing basis, am I doing right? Am I moving in the right direction? Do you think I’m progressing? Nobody’s going to wait for an annual cycle to get that feedback.”

So, how do you make the feedback process quicker? 

David Hassell, the Founder and CEO of 15five suggests doing three things:

1. Have Weekly One-on-Ones

A 2015 Gallup study revealed that employees with managers who regularly help them set performance goals and then hold them accountable are about 60% more engaged than those with managers who don’t.

Thus, it makes sense to have regular feedback and goal setting opportunities if you really want to get the best out of your employees.

David suggests that every company could begin by asking their employees these five questions on a weekly basis:

1) What’s going well in your role?

2) What challenges are you facing? Where are you stuck?

3) On a scale of 1–10, how happy are you? Why?

4) Provide one idea to improve our product or service.

5) What are your top 3 priorities for next week?

2. Have Quarterly Performance Snapshots 

Chances are that you already break up the year into quarters, so rather than just looking at the company-wide financials and goals at this time, take it a step further: start looking at the employee’s performance as well.

Look back over all the feedback and goal sessions you’d had from the last 3 months and then work out what needs to be improved for each individual going forward.

3. Separate Compensation Review from Performance

Without an annual performance review, one might ask: How will I know when an employee is deserving of a promotion or an increase in compensation? 

Really, you need not overthink it: Simply give promotions and bonuses to those employees that are constantly meeting their goals and delivering for the company.

As Ollander-Krane from The Gap says,

“If a product does well, you reinvest in it, and the concept here is the same — you give more money to the person who is delivering the best results.”