For the past few years, it’s been a hot HR trend: the move away from the traditional (aka “dreaded”) annual employee evaluation. Evaluations are viewed as outdated, too formal and too demoralizing. So yesterday. So what happens when they’re gone? Turns out the results are disappointing.
Companies that have jettisoned formal evaluations are seeing declines in the quality of managerial feedback, top performers’ dissatisfaction with pay differentiation, and reduced employee engagement. These are the findings of a recent study by CEB, a research and technology company.
“I’ve experienced HR managers coming to me for advice, feeling lost after ditching the annual performance review,” says Tom Haak, director of the HR Trend Institute (whom I interviewed for additional perspective on this issue),”because they didn’t have a new performance system in place.”
Indeed, it only makes sense. If you’re going to remove a performance management system, you need something to replace it with. I’ve long been of the opinion that the real problem isn’t the performance review itself, but weak management — the lack of clear objectives, ongoing feedback, and general managerial backbone throughout the year… which often make evaluations at the end of the year resemble a train wreck more than a dialogue.
Which is why I read with interest the results of this recent CEB research. Let’s look more closely at the findings for companies that have removed formal reviews.
Manager “conversation quality” declines by 14% – Managers are struggling to explain, the report notes, how employees “performed in the past and what steps to take to improve future performance.” Not really surprising if performance management infrastructure has simply been removed. “What they don’t realize,” Haak says, “is that what they actually need is to adopt a new performance management system that encourages real-time feedback in the workplace.”
Top performers’ satisfaction with compensation decreases — This finding should make any HR executive nervous, as alienating star performers is the absolute lastthing a good manager wants to do. According to CEB, satisfaction with “pay differentiation decreased by 8%” since managers now have more difficulty “explaining how pay decisions are made and linked to individual contributions.”
Employee engagement drops by 6% — Another unsettling finding. CEB attributes the decline to managers’ increased difficulty “doing the very things that are proven to engage employees,” such as setting clear goals, holding “clear performance and development conversations, and providing appropriate rewards and recognition.”
Performance management is hard. GE recently got rid of annual performance reviews. Jeff Immelt, CEO said “we’re trying to end anything that was annual or quarterly and make everything more real-time. We wanted to make the feedback process more like how we give each other advice in the real world.”
The struggles with strategic execution and alignment ring true for so many businesses, and the solutions that exist in the market today don’t connect strategic planning to culture and with the company’s biggest asset: its people. Get rid of the traditional performance reviews that don’t work. Create development plans aligned with an employee’s goals. Facilitate continuous coaching and feedback and enable a more productive cadence of performance based management, review, evaluation and culture.
Does it have to be an either/or, all-or-nothing choice? Is there an alternative? Yes, with ETW.
ETW makes a platform to track, evaluate and measure employee performance against goals. Easily execute your long-term strategy and translate into actionable goals. With ETW you can easily communicate the company’s roadmap to success and engage everyone throughout the organization. ETW is the business operating system for the modern enterprise.