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Yearly Performance Review, an Archaic Ritual – It’s Time to Let it Go

Replace it with year round organic leadership

And it is that time of the year – again

By now, HR (Human Resources) would have posted the calendars and deadlines for completing the annual performance reviews. Both the managers and managed would be dreading the process, as well as the outcome. Review week is the most stressful week of the year, when water cooler chats are in whispers, facial expressions are loud, humor and jokes are down, and everyone wears a formal nervous smile 

I have worked with six different companies, global multinational corporations, family owned businesses as well as dynamic start-ups, but I have yet to witness a performance review system that could be considered transparent, fair, rational, and productive

It is fascinating that the industry has solved unimaginable technical challenges, reached unreal financial successes, but still hasn’t figured out how best to measure the performance of their biggest investment, the people

Times they are a changin’

Since the advent of information revolution in the 80s and 90s, the definition of work and output is changing every day. Gone are the days when productivity could be simply measured as the number of outcomes achieved by an individual (no. of burgers flipped, no. of acres harvested, etc.). At today’s work place, in more and more cases, work is done in teams, can be performed online, is increasingly qualitative in nature which is harder to quantify, and the outcome could take months and years to materialize, in case of closing sales, etc. It is almost impossible to have a check-box exercise which can accurately measure the contribution of each person in a team effort. Forced comparison has the logical effect of pitting team members against each other, which directly impacts team synergy and the will to march together. Focus shifts from team achievement to personal promotion

According to CEB, a corporate research and advisory firm, only 4% of HR managers think their system of assessing employees is effective at measuring performance, 83% say their systems need an overhaul. At a typical company, only one-third of the highest performers actually get the highest performance score based on their actual contributions to the company’s performance

Forward looking fortune 500 companies are trying alternate approaches to annual performance review: GE is moving away from its infamous yang-n-rank forced purge system. Google’s objective-and-key-results (OKR), Adobe’s regular feedback and check-in, Eli Lilly’s ‘trust’ centric engaged communication, etc. are some examples of companies switching from the cold command and control type management style to a more organic, engaging and mutually agreeable system focusing less on evaluation and more on development

Every year, HR departments invest incredible amount of time and money on newer software, processes, methodologies, and consultants, all in an effort to improve their performance review system. A new system is implemented for a few years, and is then replaced by another one. A consistent positive improvement is yet to be witnessed. Performance review is mentioned consistently as a major cause of job dissatisfaction in employee surveys

This is because in reality, performance review has become a venue to unveil the decisions that have already been made by managers with their managers about who gets what, who is to be promoted, who’s to be demoted, and who is given a yellow card. The fancy shmancy online review is nothing more than an exercise in futility, designed to give an illusion of a legitimate process. Sad news is that everyone knows it

It’s about time

It’s about time the archaic ritual of performance review is replaced by real leadership. If I, as a leader, consistently provide my staff guidance and thought leadership, empower them to be best at their jobs, and provide on time positive critical and thoughtful feedback throughout the year, holding them fully accountable for the quality of their work, then what’s left to discuss at the annual review?

I hope that by the time my teenage daughters enter the work force, a formal performance review template will be a history museum artifact, along with the carbon paper and the typewriter 

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