Are annual performance reviews keeping companies from moving forward?


I have long questioned the sanity, value and process for the annual employee performance reviews for most companies, especially for procurement and supply chain job roles. Too many supervisors, trying to be kind, overrate employees only to find that they have a major problem when the employee’s performance is no longer acceptable. Looking back on my own corporate career, I had several bosses who were uncomfortable delivering the performance reviews. Perhaps the worst was the one who sent my performance review in an email with a note “if you have a question or want to talk, let me know”. Of course many employees are intimidated by the process and very few have comments or want to let the supervisor know what the think about the review or the process.

There is little doubt that job roles changed; many team members are on-call 24/7, global, cross-functional and cross-business. Employees are reporting to more than one manager and are responsible and accountable for collaborating, solving business problems, applying business acumen, detailed analysis and, ultimately, enhancing shareholder value. With job descriptions rarely keeping up with the job role evolution and matrix reporting relationships, annual performance reviews do not reflect the dynamic environment nor the value of the individual to the organization.

I have always found it difficult to evaluate a whole year’s work on a one-page summary. Companies like GE, Microsoft, Deloitte and Accenture are scrapping the annual performance review. To do this, it’s necessary to evaluate the team as well as the individuals within the team for the contribution they have made to shareholder value. Many of our evaluation systems are based on models and point scales established by the HR department. This model does little to evaluate performance and is designed to distribute pay raises and bonuses equitably. The issue with this process is that not everybody deserves a raise and some performers deliver higher shareholder value than others and should be compensated accordingly.

  • Annual reviews are not in real time; they focus on looking in the rearview mirror rather than where you need to go.
  • Most supervisors reflect only the performance of the last quarter, leaving them nearsighted.
  • Course corrections need to be made daily, weekly and monthly to truly influence employee performance.
  • Typically, annual reviews are subjective and not fact-based, leaving employees disgruntled.
  • HR point scales may not reflect employees’ true performance and are often adjusted downward for employees receiving a stellar rating.

For organizations to meet their future needs and targets, consideration should be given to scrapping defined point scale, annual reviews and realizing that properly coached employees make a huge contribution to shareholder value. I’m an advocate of providing feedback to employees that acknowledges strengths, gives examples of any weakness and focuses on behaviors and things that can be changed. While everyone has packed schedules and is extremely busy, it is it is important to take the time to provide regular (weekly or monthly) feedback to employees. As performance issues arise, they need to be documented and dealt with immediately.

I’m glad to see more and more companies realize that the current methods of rating employees are out of step and antiquated as we evolve in the information age.

Are you taking a step into the future?


One response to “Are annual performance reviews keeping companies from moving forward?

  1. Great article! This should get around to a lot of HR depts.

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