If you’ve felt the itch to reimagine your company’s performance review structure, your head is probably in the right place.
According to a recent Deloitte survey, 58 percent of executives believe that their current performance management processes neither drive employee engagement nor high performance. If engagement and performance are low, it’s time to start addressing how you’re conducting performance reviews.
History of Performance Reviews
The modern performance review originated during the Industrial Revolution, when a laborer’s performance could be accurately measured by their product output: the number of railroad ties installed, textiles produced, for example.
In today’s economy, there are more “knowledge workers” than ever before: people who are paid to think and produce ideas rather than material goods. In this type of work model, that traditional approach to performance reviews is no longer suitable.
Beyond their outdated structure, today’s widespread ranking- and ratings-based performance reviews damage employee engagement by isolating high performers and costing managers more overhead evaluation time. Only eight percent of companies report that their performance management process drives high levels of value, while 58 percent said it isn’t an effective use of time.
Tips to Improve Your Performance Review Model
Consider an Ongoing Conversation vs Yearly Review
Many employees find that annual check-ins are simply not enough to gain a big-picture understanding of performance over time. Instead of waiting until the end of the year to evaluate, consider bi-weekly or quarterly check-ins with all direct managers. Accenture—one of the largest consultancies in the world—recently scrapped annual performance reviews in favor of a system in which employees receive timely feedback from their managers immediately after a completed assignment.
The big takeaway is that leading organizations are ditching the annual evaluation cycle and replacing it with ongoing feedback and coaching. By opting for a continuous review model, organizations can promote more gradual, holistic employee development.
Decoupling Yearly Performance from Compensation
Several years back, the separation of pay from performance was making its way into corporate playbooks. In 2015, General Electric actually abandoned its merit pay model.
The most common method for decoupling salary and performance (in a linear way), is to instill more continuous, instant feedback per project, while still retaining a single annual conversation about money.
This approach fosters a 360-degree view of compensation and gives employees more time to think about their performance and ways to improve throughout the year.
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