It might be time to give the widely used annual performance review a review of its own. Is it an effective management tool, or does it cause problems as it attempts to solve them?
Let’s look at the disadvantages:
- It focuses on maintaining control of the individual
- It shifts responsibility for personal and professional development to the boss rather than to the employee
- It creates anxiety
- It discourages genuine communication
- It encourages special treatment toward the boss or person performing the review
- It’s not adequately tailored to the individual
- It’s connected to issues such as discipline, termination, pay raise, bonuses, promotions, etc.
- It sets up a system of feedback that’s less frequent and less timely
Employers often cite legal protection as a reason for doing annual reviews, but here’s the reality:
- Reviews do not provide legal protection in the case of firing
- They are not required by law
- They do not prevent lawsuits
- There are other ways to document underperformance in support of termination
- Firing an employee can happen at any time and does not need to be related to the annual review date
What Are the Alternatives?
If an employer decides to part ways with the annual performance review, potential replacements include:
Key Predictive Indicators (KPIs). Examples include:
- Contribution to the firm—both financial and internal value
- Feedback from customers
- Relational skills
- Ability to listen
- Communication skills
- Ongoing learning and coaching skills
- Ability to delegate
- Ability to deal with change
- Number of customer contacts per week
- Level of professionalism
- Enthusiasm for work
Manager’s Letter. Originally introduced by Peter Drucker, the Manager’s Letter:
- Is written by the employee
- Defines the boss’s goals for a determined timeframe, as well as the employee’s goals as they align with the company’s goals.
- Addresses performance expectations, identifies potential challenges and assets, and outlines necessary resources.
- Is signed by both boss and employee as an agreement and then reviewed and updated twice a year.
After-Action Reviews. In an after-action review, often used by the U.S. military, the boss and employee ask the following assessment questions:
- What was expected to happen?
- What really happened?
- What went wrong and what went well?
- What have we learned and how can we make improvements next time?
These are just a few examples of potential replacements for the annual performance review. Contact us to discuss these and other options that might work for your company.