Yang: OMG! No Annual Performance Evaluation?!

Los Alamos

Like late night TV show hosts having a heyday with political news, I take guilty pleasure in the recent rash of news and articles about workplace practices, such as the frantic pace at Amazon.com (link), the cosmic stupidity of using a work email address for an Ashley Madison account (link), and now, the new trend at several major corporations of eliminating annual performance reviews (link).

I want to get into all of these topics – the Amazon.com story alone offers myriad of blog opportunities – but today, I’ll start discussing the ritual of the annual performance review that no one likes. Okay, there may be one person in the whole organization who likes it, the executive overseeing the performance review program.

In major organizations with more than 10,000 employees, managers spend 200+ hours a year evaluating their direct reports (average 8-10), which adds up to approximately $35 million. This quantity of time and effort competes with the rapidly growing set of other responsibilities imposed on managers. Of course, one can argue that many of the managers’ oversight responsibilities are self-inflicted, but that’s another topic. 

The point is that not withstanding all the time, money, and effort pouring into this annual ritual, organizations are not getting what the performance review intends – better performance from employees. In fact, “Brain research has shown that even employees who get positive reviews experience negative effects from the process. It often triggers disengagement, and constricts our openness to creativity and growth.” (link).

It will not surprise the cynics among us that, despite abundant evidence for the null if not downright negative effects of performance management, at present only 10 percent of Fortune 500 companies have abandoned the practice, Microsoft, Metronic, Adobe, Accenture, Deloitte, to name a few. The latest that joined this growing “trend” is GE. GE now ditching the forced ranking system (which was once a trendsetting process made famous by the former CEO Jack Welch) has been viewed by many analysts as particularly significant, the potential tipping point.

I applaud abandoning the annual performance evaluation practice, but as usual, I am wary (and weary) of the “trend” or “fad” in whatever forms that replace the annual ritual. So what will be the replacement? 

While most employees still need feedback, given the rapid pace of operations and technology change in today’s global economy, whatever happens in the once-a-year performance evaluation exchange is almost certainly outdated. Praise or critical remarks regarding a project done six or 10 months ago carries little meaning for the employee’s current status or future development. Most companies that have replaced the annual evaluation have adopted a “just-in-time” feedback system. 

Many of the big organizations have their own internally developed app for instant feedback; employees (including managers) now receive feedback on the current work from both manager and colleagues. Note that one still needs to take the time to compose feedback, and the receiver still has to invest time in processing the feedback, but at least most of such feedback is (reasonably) current. And instead of a forced ranking of all employees, the practice nowadays is to judge a person’s performance against the role she assumes, and to assign salary and promotion accordingly. Kind of like “Back to the Future?!” 

No practice, however thoughtfully laid out, is ever perfect. When feedback is provided anonymously, there is always the danger of platitude, sabotage, nitpicking, or just plain rudeness. After all feedback is gathered, the really nasty comments would stand out. Seeing comments radically different from the majority of other comments may warn a manager to allow a period of time to pass and determine if negativity gains additional momentum or credibility. Yes, if a person receives more negative comments than positive, that’s a strong indicator. 

As I hinted earlier, the new practice doesn’t necessarily save time or money, but hopefully, the return on the “investments,” in the form of quicker feedback and in-depth conversations between manager and direct report, is a more committed, smarter, and more nimble workforce. Still, I am wary because whenever a practice becomes a trend or a fad, people are prone to doing it mindlessly. I’ll be watching this development with interest. Till next time,

Staying Sane and Charging Ahead.

Direct Contact: taso100@gmail.com.

Editor’s note: Dr. Yang has a PhD in Management from the Wharton Business School of the University of Pennsylvania. She taught at Wharton for a number of years, and consulted for small groups and small organizations and on cross-cultural issues. Her professional worldview comprises three pillars: 1. All organizations are social systems in which elements are inter-related. 2. To improve organizations, the focus should be on the positive dimensions on which to build. This philosophical foundation is Appreciative Inquiry. 3. Yang subscribes to the methodological perspective that she is part of the instrument from which to gain quality data from respondents, and with which to compare and contrast with others’ realities.


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