YEAR END PERFORMANCE APPRAISALS ARE SO OLD SCHOOL

“Financials are measured monthly, so why is employee performance not measured with the same frequency?”

Technology has changed so many things in the world around us from how we hail a taxi (Uber) to the way we interact with loved ones via video calls (Skype or Facetime). Yet companies often adopt technology at a much slower rate than consumers.  A number of years ago, I led a project at Time Warner Cable to move from paper based performance appraisals to electronic appraisals.

"The goal of a performance appraisal should be to provide timely and candid feedback"

Fortunately in our undertaking we rethought the entire process and didn’t just digitize the antiquated form.  We created a new set of measurements and created a process that was driven by the employees self assessment followed by the managers review.  This is now considered a best practice and common-place in many organizations.  Each year the assessment tools provided by IBM/KenexaSAP/SuccessFactors and others continue to improve in their functionality, yet companies are very slow to shift their processes and approaches to performance management.  It is interesting to see that the pure play talent management providers have all been gobbled up by enterprise software solution providers like IBM and SAP.  These organizations recognize the value in helping organizations to measure employee performance, however the approach is slow to change.

"Performance management should not be an event driven activity, it should be an ongoing process."

Performance management should not be an event driven activity, it should be an ongoing process.  Technology provides an incredible amount of flexibility for organizations to conduct appraisals and assessments throughout the year, yet most organizations are still married to a mid-year review and year-end review cycle.  This approach serves little benefit to the employee.  Organizations report financial performance on a monthly or at least quarterly basis, yet employees only see their performance reports twice a year at best.

Separating performance appraisals from the merit cycle is a healthy change that more organizations need to embrace.  The goal of a performance appraisal should be to provide timely and candid feedback to recognize good performance and to help an employee adjust in the areas that need improvement.  Tying performance appraisals to year end and to merit calculations introduces a number of biases that have been documented in countless reports and studies.

Progressive organizations are moving away from the traditional performance reviews and cycles and leveraging online tools to provide better feedback in real time.  The tools to do this have been available for years, but the behavior change in approach has lagged.

At Groove Management we have devised a new approach to performance management.  It involves a monthly employee scorecard.  Each month all managers rate their employees performance and provide that feedback via a one on one meeting.  The scorecard consists of five questions:  Three multiple choice rating questions, one comment and an overall rating on a three point scale.  Each month all employees get a rating on the three point scale.  At the end of the year those ratings are compiled into a review that averages the ratings.  The overall score will be between 1-3.  The manager has the discretion to round out the average in creating an overall score for the year.  The monthly data is shown in the report, so the result is a fact based rating that includes monthly input from throughout the year.

Monthly Performance Scorecard

This approach moves performance appraisals from an event to an on-going process.  Employees who have poor performance in a given month are aware of where they stand and that can motivate them to turn things around in subsequent months.  Conversely, employees who are performing well are recognized for their strong performance and that can serve as further motivation to keep up the good work.

"Financials are measured monthly, so why is employee performance not measured with the same frequency?"

We believe that this real time scorecard approach can be a game changer for organization.  Employees know where they stand at all times, managers are no longer burdened with a long process at the end of the year and the organization can benefit from a more data driven approach to performance management.  Aggregate scores for a given month can be reported and correlated to financial performance as well.  This could provide some interesting insights into the tie between individual performance and company performance.

As your organization scrambles to complete year-end performance reviews, ask the question “Why are we doing this at the busiest time of the year and who benefits from this approach?”  What you may find is that your process is not serving your organization and your employees very well. It might be time to rethink your approach to performance management.