Business

Why employee performance reviews are getting sacked

The Office
Image caption A still from TV comedy The Office which mocked corporate practices like appraisals

An officious boss stares across a desk at a cowering subordinate.

What have you done this year to justify your salary?

The employee quakes and mumbles something, hoping at best to boost their pay, at worst to avoid getting sacked.

It's the annual appraisal.

Fans of The Office TV show will remember the Appraisals episode from 2002, when David Brent sat down with Keith Bishop from accounts, armed with a standardised office questionnaire.

What were his strengths? "Accounts". Weaknesses? "Eczema". And the training he received to use his computer? He didn't know.

Perhaps none too soon, this clumsy method of evaluation, which ranks, grades and irritates employees across the world, is being re-appraised - and found wanting, by some firms, at least.

Microsoft, Accenture and Deloitte are some of the companies that are reshaping their annual performance review processes, moving away from rigid rankings, into more fluid feedback,

Younger companies like Amazon ensure employees can get feedback anytime from managers and colleagues, rather than just once a year. But older, more established organisations are also looking at a fresh approach to evaluating staff - whether the employees are ready or not.

Rating and ranking

Perhaps surprisingly, one of the leaders of the trend away from annual appraisals is General Electric (GE), which employs more than 300,000 people across the world.

Its infamous performance reviews once epitomised the detested process that's been dubbed the "rack and stack" or "rank and yank" system, which called for managers to rank employees, then sack the bottom 10%.

GE's former chief executive, Jack Welch, became notorious for axing the lowest rung of performers.

Image copyright Getty Images
Image caption Former GE chief executive Jack Welch was known for embracing employee grading systems

Now, GE is rolling out a process focused on employees' goals, rather than their grades.

But that doesn't mean there isn't still a bit of stress involved.

"It is really a shift from what we have historically done at GE," says Janice Semper, leader of GE Culture, the department spearheading the change.

"The focus is much more on the people, developing them, and much less on rating and ranking people."

The new process includes an app called PD@GE (Performance Development at GE), a technical tool that GE designed.

Rather than hearing how they're doing just once a year, employees have access to what the company calls "insight" whenever they want to see it - and even if they don't. The feedback is available 24 hours a day on employees' mobile phones, or on other platforms.

Image copyright Getty Images
Image caption Some appraisals are better than others

The feedback comes from peers, as well as managers, and focuses on frequent discussions between managers and staff, and their progress toward short-term goals.

Ms Semper likens the app to an online notebook.

"It's moving away from an annual evaluation to a continuous series of dialogues that happen throughout the year between managers and employees," she says.

Instead of just judging and grading employees, the system is intended to help them improve.

The manager then becomes a coach, rather than just a critic.

Ms Semper says: "Obviously we will still have employees that at the end of the day may not able to live up to the expectations of the company."

But those employees generally self-select, she says, they're not shown the door at the end of a negative review.

Time and talent

Saving time and retaining talent were driving factors behind the decision of US software group Adobe to revamp its performance review process.

Adobe has a similar ethos to GE - instead of an annual rating and ranking, employees get frequent "check-ins" with their manager.

Image copyright Getty Images
Image caption Adobe gives its staff regular feedback on their performance

"It's really more individualised," says Donna Morris, senior vice president of human resources at Adobe, which employs 13,500 people.

But the revised system is not just intended to help employees improve their performance - it's also designed to save the company time, and with it, money.

The new system has saved 80,000 hours of what Ms Morris called "administrivia."

She says staff members have welcomed the shift too, with fewer employees leaving voluntarily since the company implemented the change three years ago.

"The employment market is just so hot and feverish that our ability to not only retain critical talent, but also attract talent, is paramount."

The check-ins tend to focus on the future, rather than the "rear-view mirror" approach of the past.

Performance previews

For employees who dread appraisals, the prospect of 24-hour-a day feedback on their performance might seem even more daunting.

Some credit the social media revolution for opening the door to real-time reports in corporate communication - employees are accustomed to instant gratification when they post a picture on Instagram or Twitter.

But getting comments from friends on a cute cat photo is different from seeing comments from co-workers about a disastrous presentation.

Ideally, experts say that the new trend in performance management could help employees do better, because it looks forward, rather than backward.

"You have got to make it possible for people to learn from mistakes, not to put them in situations where they have to deny their mistakes because the consequences are too bad for them," says Samuel Culbert, professor at the UCLA Anderson School of Management, author of the book: "Get Rid of the Performance Review!"

He argues for a process which he calls the performance preview, which would allow managers to help their teams improve their work, rather than try to cover up their mistakes from the year in an annual interview.

"When things are going badly, the expectation is you talk about it while there is still time to turn things around," says Mr Culbert.

But even at companies without rating and ranking systems, the demise of the performance review does not necessarily mean the end of unpleasant corporate conversations.

With the new trend, employees won't have to wait to hear what their boss - and colleagues - don't like about their work.

They can find out in real-time, even if they would rather not find out at all.

But at least they have a chance to try to correct their mistakes - or find a new job.

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