Traditional Performance Management No Longer Works

Each year, most companies prepare to conduct annual performance reviews for their employees. They are costly, take a lot of time, and according to a Gartner poll of HR leaders earlier in 2020, more than 80% of people don’t believe they are motivating or even help improve performance. So, why are we still doing them?

The traditional performance review goes something like this:

  • Set annual SMART goals and objectives for your employees for the upcoming year.
  • Review the goals and objectives once a year and issue employees a rating of between 1 and 5, or a statement such as “meets or exceeds expectations”.

Even with the changes many companies have tried to implement in recent years, such as shortening review forms, automating the process, or changing their internal rating systems, traditional performance reviews still don’t work. Here are the top four reasons why.

Annual objectives can’t keep up with the changing environments we work in

Setting objectives in January won’t necessarily stay relevant until the following December. A client’s needs change. Company objectives change. People leave, and new people join the team. And new work sometimes takes priority over what we deemed a priority almost a year ago. In addition, individual objectives can’t always be precisely aligned with senior leadership’s objectives. Objectives that work are flexible and must be based on a team’s needs and revisited often.

Once a year feedback is mostly pointless

Imagine a friend or family member of yours doing something that causes you harm and needs addressing…would you write it down and wait 6 months to tell them? Of course not! Feedback is best given at the time the infraction occurs, or when a behavior needs modifying. This is also true when behavior is positive, and an employee does something of value. You wouldn’t want to wait almost a year to hear from a prospective client that liked a pitch of yours, to be told they want to hire you. You want that positive feedback immediately so you can address their needs right now.

How we deliver that feedback also matters. The traditional way feels very parental, we sit our employees down once a year and tell them what they did right and what they did wrong. This can lead to defensiveness. By delivering feedback in short bursts, through frequent check-ins throughout the year, it will not only be most relevant, but your employees will feel less threatened than during a big, annual sit-down.

Traditional performance ratings don’t reflect accurate data

Oftentimes, performance ratings rely on recent work or projects, which is known as recency bias. By rating an employee on only their most recent work, especially if there was a mistake made or the ball was dropped on a project, their rating may be significantly lower than if they had been evaluated on all of their work from the entire year. By putting one person in charge of a performance review, the risk of this happening is much higher since they will draw on their personal experiences of working with an employee. Additionally, an employee’s performance cannot always be quantified into a ranked number of 1-5.

Traditional performance management doesn’t improve performance

Ratings don’t motivate better performance! If you know that the performance review is going to ultimately lead to a grade, you will go out of your way to show only the best parts of yourself and cover up any possible weaknesses. To motivate improved performance, we must create a space for individuals to be open, honest, and curious about what they’ve done that hasn’t worked, and ask how they can learn from their mistakes and truly improve their performance. These conversations must be employee-led. Ratings and grades restrict employees from being honest and improving their performance.

Traditional performance reviews are a thing of the past, indicative of an old way of thinking. Allowing managers to manage their employees throughout the year and provide timely and relevant feedback not only takes away the time burden of the annual review that nobody really wants to do anyway, but it sets the stage for frequent check-ins, with valuable, employee-led conversations that lead to higher performance and engaged employees.


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