Are the alternatives any better than annual performance reviews?
Presented here for discussion is a summary of a current article published with permission from Knowledge@Wharton, the online research and business analysis journal of the Wharton School of the University of Pennsylvania.
When it comes to workplace events that produce resentment and anxiety, few score higher than the big annual performance review. Recently, Adobe, Kelly Services, GE, Deloitte and PwC have ended them and the rippling out to smaller firms and other sectors appears to be underway. To which many say: good riddance.
Anna A. Tavis, a clinical associate professor in leadership and human capital management at New York University, says the traditional annual review with its ranking system essentially sends the message, “here’s your grade for the year, and you can’t do anything about it, and, by the way, there are compensation consequences — that’s where the culture of fear came about, Peter is better than Paul.”
She adds, “Then you factor in bias or that a manager might not have visibility, or doesn’t remember what 35 or 40 people have done, and there were lots of faults built into the old system.”
But are better systems and results coming in behind the old?
Prof. Tavis says the best companies have shifted to conversations with workers that occur much more frequently than once a year, are less focused on the past and more on the future, and involve continuous adjusting of goals. These firms also are giving managers the skills to be coaches “rather than task masters,” she says.
Wharton management professor Peter Cappelli, who is also director of Wharton’s Center for Human Resources, has a wait-and-see attitude about whether employers will really create a different kind of relationship with employees or end up doing less performance appraisal and replacing it with nothing instead.
“The thing I would watch is to what extent this is an ideological battle,” says Prof. Cappelli. “Is it all about the money, all about rewarding people — that [this is] how things get done, we have to punish the bad employee and fire them? Is it all about the economic incentive? Or is it much more about relationships and developing people and encouraging them to perform better? It’s an ideological divide that has to do with human nature. And to some extent that’s at the heart of this whole issue.”
DISCUSSION QUESTIONS: Are you a fan of annual performance reviews for retailers? Are there better alternatives?