Ditch performance reviews and do this instead

It’s that time of the year when many managers are booking performance review meetings. Not so fast, urges Raconteur’s HR columnist, Liz Ryan, who recommends a more constructive alternative

231030 Performance Reviews

The end of the year is in sight, which means that it’s performance review season. Many businesses will soon be calculating annual bonuses and salary adjustments. 

That’s fine – determining rewards is a critical business process. But are performance reviews equally important? That’s less clear. Is it vital for someone to know how their manager rates their work over the year? And, most crucially, do such reviews actually help businesses to perform better?

There’s no evidence to suggest that they do. Employees and managers alike hate doing performance reviews and HR hates administering them.

Costly, drawn out and demotivating – why do we persist with performance reviews?

Why do we keep conducting a backward-looking process that’s a massive time-suck with no clear business value, especially in a period when we should be starting to consider next year’s challenges?

Performance reviews are one of what I call the 10 pillars of fear-based management. These pillars exist not to move an organisation forward in any tangible way, but to remind people that there is a system – and that this system is big and they are small.

The performance review is a perfect example of a fear-based management practice. It’s designed to reinforce the power of an employer over its employees. If there were a compelling reason to retain the practice, we’d all know about it, but we don’t.

Virtually every decision made in a company requires a business case. If you need a new printer in the office, for instance, you need to make a case for procuring one. You must explain what bad thing would happen if the printer that died yesterday were not to be replaced quickly. 

Yet the performance reviews that take up hours of managers’, HR folks’ and employees’ time simply happen. No one makes a business case for them and no one asks for one. Why not? Because a pillar of fear-based management doesn’t require justification. 

But surely there must be some good reasons to persist with performance reviews? Let’s examine the common arguments.

Five cases for retaining performance reviews

1. We need performance reviews to determine pay

As an HR exec of 30 years, I know that managers allocate salary budgets first and assign performance ratings second. They know who’s getting what increase before they start their first review. They match the rating they give to the award they’ve already decided. 

No one has ever said: “Wow! I had no idea Frank would get the maximum 4.2% pay increase until I completed his performance review.” 

If someone has actually said something like that to you, they were lying.

2. We need them to document performance problems

Performance reviews for so-called knowledge workers seldom use language stronger than: “Sally continues to progress in her knowledge of investor relations,” even if she is an inch away from being dismissed for poor performance.

When any manager approached me over the years, ready to terminate someone’s contract, I’d look up the most recent review of the employee in question and always find it to be somewhere between neutral and glowing. 

“So you’re ready to let Sally go for poor performance, but her review says that she’s above average,” I would say.

“I know,” the manager would reply. “I was trying to motivate her.” 

3. We need performance reviews to help us plan for next year

Just plan for next year. Performance reviews have zip-all to do with it. 

4. We need them so that employees can improve their performance

Why wait for an annual performance review meeting to help someone do their job better?

5. We need performance reviews so employees will know how they are doing

Just tell them. Tell them in the moment, like this: “Amazing job, Sally!”

Or like this: “George, would you like me to walk you through the pricing tiers again? I know they’re confusing.”

Say what you need to say at the appropriate time. That’s usually immediately, not months later. 

You build trust by being available and authentic. You destroy trust when you save up negative feedback to bushwhack someone with it at performance review time. 

The arguments for performance reviews simply don’t hold water. There’s no reason to stop your whole operation once a year to fill out forms and hold tedious, meaningless, soul-crushing meetings.

Any manager can meet an employee at any time to discuss anything. There’s no need for an annual meeting to go over what someone did well or badly over the past year. If members of your team want your feedback, they’ll ask for it. 

What should we do instead?

We can evolve past performance reviews – and we must do so if we want to keep talented people focused on their goals, your customers and each other. Their boss’s opinion, if we’re honest, isn’t all that important. Staying connected to their power source – the aspects of work that keep them engaged – is everything.

If we kill off performance reviews, what should we do instead? Have a one-on-one planning meeting with each team member annually or more often. Talk about current priorities and future projects. Talk about methods and tools. Talk about people and situations, roadblocks and solutions. 

You don’t need to hand out grades. That’s the old-school, fear-based bit that can and should disappear forever. You hire adults. They don’t need letter grades or designations such as “above average”, “fair” or “poor”. 

Every day, we improve at doing some things, realise that we’re simply not meant to do other things and muddle through everything else. Evaluating employees from all sides has never made a company or its culture great and never will. The more human we can make our workplaces, the better life will be for everyone – employees, customers, shareholders, vendors and communities. 

Pay your employees what the market pays, so that you don’t lose them. Meet, talk, plan and celebrate. Leave the bureaucracy, grading and fear behind. 

Step into the future and get all those hours and brain cells back where they belong: invested in delighting your customers and celebrating your latest successes. 

What are the other nine pillars of fear-based management? I wrote about the interview process here and will topple the rest in future columns.