Managers and employees alike typically have mixed feelings about the annual performance review season.
However, advancements in both HR thinking and technology in recent years have prompted leaders to relook their performance management approaches.
HRdepartments are often prescriptive regarding performance review processes and timeframes. For managers, it can be a time-consuming process, especially for those who have many direct reports. Employees often approach these one-on-one meetings with trepidation, even dread.
We’ve all been there. Scheduled meetings with the manager in uninspiring conference room settings. Reams of dry, official paperwork to fill in. Stilted conversations that seem to follow the same pattern year after year: a bit of positive feedback on what’s been done well and some high-level and, at worst, vague pointers on where you could improve.
It’s not surprising then that the meeting is often concluded with a sigh of relief by both parties, and the discussion is put on the shelf for another year.
The need to explore alternative, more modern approaches to performance management is greater than ever in developing countries. That’s because these countries typically have ultra-fast moving economies and highly competitive labor markets. Consequently, employees expect faster career growth and have little patience for complex and time-consuming bureaucratic processes.
In this article, we'll explore
1What performance reviews are and what they should aim to achieve
2The role they play in building the success and profitability of an organization
3The traditional and more progressive approaches employers should consider to make performance reviews a strategic business enabler
4How Google, Netflix, and Microsoft are pioneering a more progressive and agile approach to performance management
5How managers can prepare for a successful performance review
What are performance reviews?
A performance review is understood as a formal and structured feedback mechanism through which managers and other leaders assess their employees’ work performance. The objectives of performance reviews are to identify and discuss people’s areas of strength and weakness, provide constructive feedback, clarify short and longer-term goals, and discuss opportunities for employees to develop their skills.
Well-executed, performance reviews can go a long way to creating a positive culture of transparency, feedback, and lifelong learning and development in your business. Importantly, effective performance management will help people understand how their jobs contribute to the organization’s overarching strategy and goals. This will provide them with a sense of purpose and drive greater employee engagement and loyalty.
Before we delve into the mechanisms of performance reviews and the evolving approaches you can adopt, it’s useful to look back and consider the history of performance reviews and how they’ve evolved over the decades.
Let’s take a look at the timeline of performance appraisals over the last century:
📌 (1930 – 1960) – WD Scott’s performance appraisal process gains recognition
Walter D Scott further advanced the concept of rating people’s abilities through his documented performance appraisal system, which became recognized in the 1930s. By the mid-1950s, this structured performance review process had been adopted by many businesses. Scott’s approach gave managers a means to rate their workers’ performance based on factors beyond productivity alone, and evaluations included the consideration of people’s personality traits.
📌 (1960 – 1970) – The rise of Annual Confidential Reports
In the early 1960s, performance reviews began to focus strongly on “Annual Confidential Reports,” also known as “Employee Service Records,” which contained detailed information about employees’ historical job performance. Interestingly, the contents of these reports were not shared with employees. It was an approach that gained popularity among Government organizations.
By the 1970s, organizations had started to share the information contained in these reports with their employees. This was an important step as it gave people the opportunity to take note of any negative feedback and take steps to improve their job performance. Over time, the appreciation of individuals’ personality traits evolved into more sophisticated evaluations that included people’s personal career goals and aspirations and how they could realize them.
📌 (1980 – 2000) – 360-degree feedback
In these decades, performance reviews evolved further to include input and feedback from stakeholders other than the employee’s direct line manager. Some businesses were hesitant to adopt this approach as it consumed more time and resources. This period also saw the introduction and consideration of other factors such as personal motivation into performance review processes. The concepts of teamwork, collaboration, and conflict resolution also started being widely acknowledged and embraced.
The 2000s saw the performance review process focusing more intently on transparency and the importance of establishing open lines of communication between management and employees. As part of this process, both parties were required to reach a mutual agreement at the start of every year about what success would look like.
Where to next?
Recent years have seen performance review processes evolving even further and more frequently. In fact, a growing number of organizations are opting to abandon annual performance reviews altogether in favor of other more iterative and constructive feedback practices.
Central to modern performance management approaches is the appreciation of the interrelationship between performance management, company culture, [ED5] and the attainment of strategic business objectives. The importance of the quality of performance reviews, as opposed to their quantity, is being prioritized.
How performance reviews impact company success
Although some modern HR and leadership approaches recommend eliminating performance reviews altogether, others argue that such thinking is ill-advised.
The rationale of those who continue to support the institution of performance reviews is that they are inextricably linked to a company’s performance and longer-term success. They believe that by arming themselves with the correct enabling tools, organizations can leverage performance reviews as a way to spark innovation, retain top talent, and ultimately grow net profits.
So, how and why can performance reviews impact your organization’s bottom line?
The first reason is the break-neck speed of modern business. Today, market competition is fiercer than ever. Organizations must continually relook their strategies and operating models in response to evolving market dynamics and the competitive landscape. To thrive, forward-looking businesses are recognizing the power inherent in effective performance management to help them transform to meet both the current needs of their organizations and the growing and ever-changing expectations of their customers.
Performance management can and should be recognized as a strategic business enabler.
To further understand the role of performance reviews in building a thriving and profitable business, it’s helpful to consider both traditional and more modern approaches and establish their relative strengths and weaknesses.
Traditional VS agile performance review processes
Let’s delve deeper into the differences between traditional and modern, agile performance review approaches:
Traditional review process
This is a conventional approach that treats performance reviews as a one-dimensional and once-off intervention that looks at a person’s on-the-job performance over a period of a year. After the employee’s performance has been measured, they’re assigned a score or rating, along with an official appraisal letter. The performance review is then used as a basis on which to award salary increases and bonuses.
The traditional approach to performance reviews generally includes some or all of the following steps and interventions:
🥇 Rankings Method
This method involves ranking employees according to their job performance and their perceived commitment to the organization's overall success. With this approach, the goal is to create a list that ranks people numerically from best to worst.
👯♀️ Paired Comparison Method
Each individual is compared with his or her peers on a one-to-one basis. The criteria for evaluation are often very narrow – sometimes based on just a handful of traits. The number of times an employee is deemed to be “better” than another, the higher their final ranking will be.
💯 Grading method
With this approach, management creates and defines a list of “categories of worth” for their employees – usually three: outstanding, satisfactory, and unsatisfactory – although there may be more. Each employee is allocated to the grade that management believes best describes his or her job performance.
🧩 Graphic Ratings
This method uses a numerical scale (1 – 5) such as “poor,” “average,” “good,” “very good,” and “excellent” to rate different elements of employees’ performance. This approach is popular as it’s simple to construct, easy to apply across a range of job functions, and is quickly understood by graders and employees alike.
✅ Checklist Method
Managers compile a checklist made up of descriptive statements about an employee’s behavior. Raters must select one of two options: “Yes” or “No.” Each question is assigned a “weight,” which defines its relevance and impact on the employee’s final aggregated performance rating score.
🎯 Critical Incidents
This approach focuses on employees’ critical behaviors over a period of time in response to specific situations. The manager keeps a record of examples of instances where the employee is deemed to have performed effectively or ineffectively. These scenarios are used as input into the individual’s overall assessment and score.
✍️ Essay Method
The manager creates a written assessment of an employee’s strengths and weaknesses and their overall job performance. They also make comments and suggestions regarding areas for improvement and personal development.
🔍 Field Review Method
Here, an HR specialist takes the lead in the performance review process by asking employees’ superiors and supervisors to answer a series of questions about the employee's job performance and then rates him or her based on the responses received.
🔒 Confidential Report
This method is commonly used in government organizations to make decisions about promotions and transfers. Managers prepare confidential reports detailing the performance, behaviors, and other traits of each individual. Feedback is rarely shared with the appraiser.
Agile performance review process
Agile performance management systems are increasingly being recognized as a means for businesses to engage their employees better and drive longer-term success. They are more timely, accurate, collaborative, and outcomes-oriented than the traditional method. Importantly, agile performance review processes embrace the concept of comprehensive and continuous feedback. Today, agile approaches to performance reviews are usually complemented by digital performance management software and tools.
It’s important to note that the word “agile” is commonly used in the realm of modern engineering and software development. Here, it refers to the process of building products in a manner that’s flexible and accommodates frequent change and improvement.
Let’s review the key tenets of agile performance review approaches:
💬 Frequent, regular conversations
The first key principle of agile performance review processes is regular and iterative feedback and improvement. This means that managers and their teams communicate on a weekly or monthly basis about on-the-job performance, rather than treating it as an exercise to be conducted just once a year.
These conversations focus on projects that employees are already working on and other near-term works and typically involve the manager asking employees specific questions, such as:
- What are your priorities for the week ahead?
- Are you currently struggling with anything and, if so, how can I help?
- Are there any learnings you’d like to share?
- Are there any particular new projects you’d like to volunteer to take on?
The next principle of agile performance management is employee-centricity. This involves managers being encouraged to accept that everyone has different personalities, strengths and weaknesses, career goals, and preferred ways of working. Managers are expected to be flexible enough to create plans that are aligned to each individual. Employee-centricity also involves asking people about what they enjoy about their work environment as well as areas where they feel their employer could do better.
Agile performance management approaches avoid point-in-time interventions. The performance review process is “always-on.” Employees’ on-the-job performance, sentiments, and feedback are gathered constantly throughout the year. Advances in HR technologies are leveraged to gather and synthesize ad hoc data about both individuals and teams. The advantage of this approach is that potential problems may be identified before they become major issues.
💪 Focused on how people work
Traditional performance review structures don’t consider the true nature of how businesses and individuals work, especially in our digital age. For instance, today, it’s often necessary for teams or working groups to be set up at short notice to respond to an immediate or urgent business need. Often, these groups comprise cross-functional teams of individuals who don’t typically work side-by-side.
All too often, traditional performance review processes aren’t designed to accommodate these impromptu arrangements. Agile approaches, on the other hand, are fluid and flexible enough to ensure that people’s contribution to these kinds of projects is taken into account as part of the performance review cycle.
🏆 Emphasis on recognition
Agile performance review approaches embed regular recognition of employees whose contribution goes above and beyond expectations. People respond well to being recognized both formally and informally and will generally become more engaged and motivated.
Comparison table: Traditional VS agile performance review
Traditional performance reviews
Agile performance reviews
Reviews happen once a year
Reviews happen weekly, monthly, quarterly, and annually
Feedback is formally communicated annually
People receive continuous as well as informal feedback
Lack of frequent guidance or developmental plans is a barrier to people’s growth
Employees use regular feedback to constantly grow and improve their performance
Communication is focused narrowly on on-the-job performance; company goals and strategies aren’t regularly shared
Communication is constructive and ensures the business’s objectives are aligned with those of employees
Performance reviews are retrospective
Performance reviews consider past, present, and future performance, which accelerates career development
Every organization is unique, so no single approach to performance reviews fits all. Traditional and agile performance review processes both have a role to play in assessing and improving people’s performance.
That being said, modern talent management professionals and increasing numbers of start-ups are recognizing the value of agile performance review processes to better meet the needs of their most valuable assets – their people – while also ensuring that the business’s longer-term strategic objectives are considered.
Lessons from leading companies pioneering agile performance reviews
There are a number of companies successfully using the agile approach from which you can learn.
Technology powerhouse, Google, is one such organization. Take a read through this article to understand more about Google’s approach to performance reviews and why it’s so successful.
Specifically, you can find out about the innovative internal grading system known as Objectives and Key Results, or OKRs, that Google has adopted. These OKRs are not directly related to performance evaluation but to monitor progress and accomplishments.
Google has also implemented a staggered approach in its review cycle. The evaluation comes comprises two phases;
A preview, done at the end of the first semester and,
A complete review, done between October and November.
The performance evaluation is divided into two different methods: Self-assessment and 360-degree feedback.
Other notable highlights and differentiators of Google’s approach include their unique ratings or calibration methodology. Google abolished numerical ratings several years ago in favor of descriptive ratings that range from “needs improvement” to “superb”.
A few years ago, Netflix completely revisited its performance approach by completely doing away with annual performance evaluations. They replaced it with an entirely 360-degree review procedure.
Employee reviews are regular but informal. The process involves colleagues giving people pointers on what they should stop, start, or continue doing. And rather than making the peer review process anonymous, they embrace “signed” feedback and even face-to-face 360 reviews.
Netflix even makes the reviews public. Their belief is that in order to build a “dream team”, an organization must “foster collaboration, embrace a diversity of viewpoints, support information sharing, and discourage politics.”
Agile approaches are defined by iterative and ongoing improvement and Microsoft has successfully applied this methodology to their performance review system.
In 2013, Microsoft saw that their stack ranking-style performance management system was negatively impacting employee engagement and motivation.
After CEO Steve Ballmer moved on, the company completely revolutionized their performance management approach. Specifically, they focused on putting more power in the hands of managers.
Microsoft abandoned their traditional performance review process in favor of more regular bi-monthly appraisals. These check-ins are formal, structured conversations between managers and their direct reports. In these sessions, they discuss goal progress, skills development, and more. This allows employees to understand whether or not they’re moving in the right direction while they still have time to course-correct.
How should managers prepare to conduct performance reviews?
If you’re a manager or team leader responsible for conducting performance reviews, your HR department most likely has given you instructions, training, and templates to guide you.
However, that doesn’t mean you can’t channel your own efforts into ensuring that these meetings go smoothly and deliver value to both you and your direct reports. Bear in mind that in our busy day-to-day schedules, it’s easy to become disconnected from one another. See your performance reviews as an opportunity to build on the rapport and relationships you have with your people.
Here are some tips to follow to get the most out of your performance reviews:
1. Clear your diary
Free up your schedule so that other distractions don’t divert your attention away from your one-on-one review meetings. Set your status to ‘Do not Disturb” and let any senior stakeholders know in advance that you’ll be focusing on your team reviews. This sends a message to your employees that you are giving their performance reviews the attention and focus they deserve.
2. Refamiliarize yourself with previous review meetings’ data and outcomes
It’s a good idea to read through the notes you made after the last performance reviews you had with your employees. This will trigger your memory regarding the key outcomes of those discussions and provide you with a good starting point for your meetings.
Also, why not take time to familiarize yourself with some useful and effective performance review phrases to ensure you arrive at your reviews with a relevant and diverse set of talking points?
3. Prepare for the unexpected
It’s quite possible that certain employees will come to their review meeting with a list of issues or grievances they want to air of which you were unaware. Don’t let unexpected curve balls derail your discussion. Stay calm, let the employee feel as if they are being heard, and, if necessary, suggest a follow-up conversation during which such matters can be discussed and understood in greater depth.
Performance enablement, why not?
Whether you are a manager or a direct report, we trust that this article has given you some food for thought and inspiration to ensure your next performance review doesn’t give you sleepless nights.
Always remember that constructive and effective performance reviews are a vital element of a business’s overarching performance management strategy. Importantly, remember that modern approaches to performance review are evolving. They’re becoming increasingly employee-centric, which means applying a sharper focus on enabling people to improve their performance as opposed to simply managing numbers and ticking boxes. Thus, it’s likely that we’ll continue to hear increasing mention of the term “'performance enablement” as opposed to “performance management” in the future.
Wherever possible, take advantage of the digital performance management software, tools, and templates that are available to simplify and streamline your performance reviews.