4 Reasons Performance Review Use is on the Decline
This just in: Companies are ditching performance reviews. This news comes from a recent study by the NeuroLeadership Institute, where analysts have been following the HR practices of 30 companies, representing 1.5 million employees, since 2011. And, they aren’t alone. Research from Bersin by Deloitte shows around 70 percent of companies now reconsidering their performance management strategy.
What are they doing instead? No-ratings systems, aptly named ‘talent conversations,’ are beginning to take center stage. While change is difficult and coincidentally avoided by many companies, especially when it comes to policy, the results experienced by early adopters of this change may convince the hold-outs otherwise.
Following are the 4 most notable results witnessed by the NeuroLeadership Institute team during its study:
- The nature of work is changing—Work simply doesn’t work like it used to. Gone are the days when people worked independent of each other toward their personal goals, established on a 12-month calendar. Now, employees are creating goals that can be reached in days, weeks or months; not years. And, they are working together to accomplish those goals as a group.
- Collaboration is improved—With the traditional review process, managers are often limited in the number of spots they can fill within each performance level. In other words, there are only so many employees that can receive a rating of “exceptional,” which fosters competition. When ratings are removed, collaboration improves exponentially.
- Frequent conversations can occur—When annual reviews are the norm, there is a tendency to reserve performance conversations and feedback for that one time each year. With talent conversations, however, the dialog is open and more frequent, improving communication, performance, and job satisfaction.
- Development occurs faster—As conversations become more regular, so too does the pace at which employees improve at their jobs. The result is faster development across the board.
If you need another reason to consider abandoning traditional reviews, consider the potential time and money savings. Deloitte reports that employees and managers collectively spend about two million hours each year on the review process. That time is mostly dedicated to talking about a rating that is based on performance that occurred in the past, rather than on the potential for growth and development.
With talent conversations, much of that time, and consequently money, investment isn’t necessary. Instead, performance is addressed as it occurs. The outcome? “Companies that remove ratings are seeing the conversations shift from justifying past performance to thinking about growth…[resulting in] better employee development, which seems to be a win for everyone.”1