Annual performance reviews have fallen out of fashion for many large organizations. Accenture recently followed the lead laid down by companies such as Deloitte, Microsoft and GAP. These are among the 6% of Fortune 500 companies that have gotten rid of rankings according to management firm CEB.
Not only is there limited evidence to suggest that appraisals are beneficial to employees, but at the same time, they are costly. Management Research Firm CEB recently found that for a company with 10,000 employees, an annual performance review process costs in the region of $35 million a year to manage.
Does this mean that we will see a future where performance reviews will no longer exist? The answer here is still “No”. We will now see a scenario where the performance management system will be used proactively, to provide regular and continuous feedback and coaching to employees to improve their skills and contribution; instead of being used primarily as a retrospective means of communicating past performance at the end of a year. This process will result in employees being more engaged and connected both to their own tasks as well as to the larger organizational goals.
Implemented in the traditional way, the new performance management system will be too expensive and unwieldy to implement. Providing regular feedback and coaching is not only expensive and time consuming, but presents its own logistical challenges, particularly in an environment where flexibility in work arrangements (like work-from-home) and a distributed workforce are the order of the day.
The easiest way to do this is by delivering ongoing feedback and coaching to employees in a personalized manner through a mobile-based solution. Communicating through bite-sized videos that can be consumed asynchronously enables employees to learn without compromising on productivity. Learning solutions that provide advanced analytics can identify skill-sets that employees need to work on – and learning content can be personalized accordingly.
Ultimately performance management should be about motivating and equipping employees to fulfill their potential while at the same time helping the organization achieve its goals.
While many companies might start to follow Accenture’s lead it does not mean the end of performance reviews. It just means that curves and forced ranking systems are replaced with a system that is continuous and empowering. The new system will eliminate comparisons and focus on the individual – is he performing now, is he being prepared for a larger role. Both organizations and individuals stand to benefit from this change.