Annual Review Under Review

The annual ritual of employees assessing themselves on a company form, managers giving their own evaluation, and the two meeting to discuss the results may be passé. Or at least deemed inadequate at some companies. There is a desire for more frequent feedback, and feedback that comes at the moment when a performance accomplishment, or setback, takes place. Most employees don’t want to wait a year to find out how they’re doing and have their concerns addressed, and managers often feel their praise or correction of an employee would be more powerful if delivered in the moment, rather than jotted down for later.

In recent years, 6 percent of Fortune 500 companies —including Microsoft and Accenture—have done away with annual performance reviews entirely, according to management research firm CEB. The firm also found that 95 percent of managers are dissatisfied with the way their companies conduct performance reviews, and nearly 90 percent of HR leaders say the process doesn’t yield accurate information. Further CEB research reveals the average manager spends more than 200 hours a year on activities related to performance reviews, such as sitting in training sessions, filling out forms, and delivering evaluations to employees.

Here’s how two Training Top 125 winners are reconfiguring and strengthening the performance review process in their organizations, plus suggestions from experts on factors to consider when revamping the review process.

More Frequent Feedback

Gables Residential has found that providing ongoing feedback combined with an annual performance appraisal improves associate engagement, says Senior Vice President of Human Resources and Training Philip Altschuler. “We believe the annual appraisal is a good opportunity for associates to get one-on-one time with their supervisor. The time also allows associates to get feedback and coaching on how to better leverage their strengths to achieve their career goals.”

Altschuler says the company also believes there is a strong need to “provide tools and processes that shift supervisors’ focus throughout the year from their technical responsibilities to instead focus on developing the people they are responsible for supervising.” Along with more frequent feedback, the company encourages conversations with managers, rather than a one-way communication. “We have changed our appraisal form so it is less about rating past performance and instead provides the opportunity for associates to highlight what they did well, along with whether or not their strengths are being utilized. It also gives them the chance to seek development in the areas they think they can (or would like to) improve,” he says. “The form is set up to drive a more discussion-focused review versus the supervisor just reading a performance appraisal form with ratings.”

Technology is helping Gables in its quest to improve the process of giving employees frequent feedback. “We currently are testing a feedback tool that integrates with MS Outlook and our performance management system. The plug-in allows supervisors and even other employees to not only log performance-related accomplishments throughout the year, but easily provide feedback and kudos to other employees, as well,” Altschuler says. “This not only allows managers to provide documented feedback, it also is an easy process for employees to make notes, so it’s easier to remember specific examples when completing the annual review.”

The goal is to make frequent documentation of feedback as simple as possible, so it gets done, rather than just thought about. “We are trying to make the documentation of performance feedback as easy as updating your status on Facebook,” Altschuler says.

Focus on Continuous Learning & Relevance

The Center for Creative Leadership emphasizes the importance of performance reviews as guideposts for continuous improvement. “Organizations are realizing they can’t rely only on this one-time event for effective performance management (PM),” says Senior Fellow Cindy McCauley. “PM is a continuous process that benefits from real-time feedback from all the people you work closely with (not just your boss).” McCauley and her colleague, Senior Faculty Member Michael Campbell, believe performance reviews still matter—if they are used the right way. They advise companies to remember what they are trying to achieve in the first place with the annual performance review and performance management overall. Instead of asking if annual performance reviews have outlived their usefulness, McCauley and Campbell say organizations should ask three key questions:

• What business outcomes are we hoping to drive with performance management?
• What process best fits with our culture?
• How would we know annual performance reviews are having a positive impact?

Getting feedback from peers, or those an employee is doing work for, can give managers a better sense of that employee’s value to the organization. “Many organizations see a lot of success with co-worker/peer feedback as part of their performance management processes,” says McCauley. “As part of the first talent management benchmarking study CCL did with APQC (almost 15 years ago) at Capital One, they told us how project managers were rated by their team members at the end of each project. The project managers got the data, but it also went to their bosses. A project manager described how it was important for her boss to get the data because he wasn’t that close to her work, so how else could he evaluate her performance?”

Setting goals also is an essential part of making performance reviews relevant and actionable. “At CCL, we advise the leaders we work with to ‘go first.’ When they identify one or two goals, we recommend they tell people what they are working on, and then three times over the next six months ask for feedback from bosses, peers, and direct reports (How am I doing?). We also advise them to ask for ‘feed-forward,’ or positive suggestions, for the future,” says Campbell. “Rather than just ask what happened in the past, ask bosses, peers, and direct reports for suggestions on future actions you might take. This process starts to create a climate where people know you are open to feedback. After six months, we advise the leader to tell his or her direct reports that it’s ‘your tu rn .’ Ask them what are they working on, and have them ask for feedback and feed-forward. This process helps employees feel safe to give feedback, and to see it as a way of doing work.”

Campbell says companies are in a good position today to provide feedback, thanks to the advancement of workplace technology. “We also have seen a few providers in the performance management and learning and development industry focusing on technology solutions to gather real-time feedback,” he says. “Tools and apps are being developed that allow employees to gather more frequent feedback.”

Good Riddance Rankings

FORUM Credit Union is another company that is rethinking its performance review system. “At FORUM, we no longer conduct the traditional annual performance review and instead have opted for a formal quarterly check-in—no rankings, just text,” says Vice President of Organizational Development MeChelle Callen. “Each quarter, employees receive a set of four to five questions to answer, and that questionnaire then is sent to the manager to review. The manager then schedules a face-to-face meeting to discuss the questionnaire.”

Upon completion, the questionnaire is loaded into the employee’s file. In some areas of the company, coaching sessions occur on a monthly basis, but at minimum, FORUM requires quarterly sit-downs between employee and manager to check in with documentation.

Having the review in writing allows for forward-looking planning to improve performance, Callen says. “Questions need to focus on the future and how to provide the tools and resources for employee success,” she says. “I think having written documentation allows employees time to reflect on what it is they want to do, what they need to be successful, and where they want to go in their careers. Having written responses is not a substitute for a face-to-face conversation, but rather, the written documentation should serve as a conversation starter.”

As FORUM continues to improve its performance review process, it is conscious of the need to keep a balance between formal and informal feedback. Callen says it’s important that managers are trained to have an ongoing exchange with employees. “I believe there is a need for some form of formalized feedback. Ideally, every business culture would be feedback-centric, but I don’t believe that is the case today, so we need to assist our leaders in moving in that direction,” she says. “That requires us, as Learning professionals, to help coach our leaders on giving and receiving feedback, giving recognition, and having difficult/crucial conversations.” FORUM’s managers, she says, provide informal positive feedback through the company’s Socialcast (Facebook for work) feed, awards, contests, and one-on-one meetings.

The key is for the manager to remain focused on the value the employee brings to the organization, and how much greater that value could be, given the right guidance, says Cy Wakeman, talent management speaker and New York Times bestselling author of “Reality-Based Rules of the Workplace.” “We need to move away from rating individuals on their performance and get clear on the value of the work they provide using far better metrics than the bare minimum standard of meeting expectations of what we needed in the past. We need to include not only what employees deliver, but their state of readiness. This takes into account the total cost of their work, beyond their salary and benefits—their emotional expense, their drama quotient,” says Wakeman. “I believe that most performance management systems are truly broken, outdated, and no longer relevant to drive the conversations we need to be having in order to fuel growth and development. We need to ensure that employees are fluent in the now, and ready for what’s next.”

QUICK TIPS

• Make feedback with employees a weekly or even daily occurrence,
• Train managers to have two-way communications with employees about performance, in which employees are free to voice concerns and offer their own insights for improving work processes,
• Use technology to assist in the process of providing constant,real-time feedback.
• Enable peers, and internal partners the employee is dowork for, to provide the employee’s manager with reviews of the employee’s work performance.
• Train managers to be forward-looking, using performance to set goals for the future.
• Do away with ranking and rating employees by assigning numbers to their performance. Instead, focus on offering written feedback, with a face-to-face sit-down meeting that serves as a conversation-starter between employee and manager.

The End (of Performance Reviews) Is Near…Or Is It?

By Tim Toterhi, Coach, Speaker, and Talent/Leadership Development Specialist

Human Resource (HR) pundits and disenchanted employees are calling for the end of performance reviews. Advocates of the idea claim that banishing the process will save time, increase engagement, and support greater collaboration in pursuit of team-based results. Proponents also cite rater unreliability and questionable calibration practices as reasons to ditch the annual event. Whether adopting this change is right for your organization depends largely on three factors:

1. Review Strategy: While some organizations use year-end reviews to provide developmental feedback and coaching, often the primary strategic intent is to differentiate performance and, thus, employee compensation. If an organization lacks the disciple or economic wherewithal to reward high performers substantially more than average performers, leaders should question whether they are truly getting a return on the time invested in the formal process. A similar inquiry should be made if the company lacks the fortitude to simultaneously take action on those who fall short of expectations, be it coaching them to competency or “donating them back to the industry.”

Key questions: What’s the primary purpose of your review process? Do you have the resources and wherewithal to fulfill that purpose?

2. Organizational Culture: Most organizations (and employees) aspire to high performance, but few take the time to define that elusive, aspirational goal. Companies with a true performance-based culture take great pains to articulate expected results and then hold people accountable to those standards. While forced rating distribution methods often derail into a costly cannibalization of your human capital, a reactive dismissal of the entire process that intentionally shifts the pendulum to a “trophy kid” philosophy of performance management can be just as damaging. When evaluating whether to ditch ratings, leaders must consider their talent brand, associated Employee Value Proposition, and the long-term effects changing philosophies will have on employee engagement and productivity.

Key questions: How do employees “win” at your company? What’s expected from and offered to high performers?

3. Managerial Strength: Peter Drucker famously noted that “culture eats strategy for breakfast.” That may be true, but it’s important to remember that managers hold the knife and fork. Even if you have a clear pay-for-performance strategy supported by a well-articulated culture that’s evident throughout the attraction, hiring, and onboarding process, your efforts will fall short if line leaders lack the managerial courage to operationalize your intent. If managers are unable to stand by and act on the ratings they provide, then the reviews are meaningless. On the other hand, if the guidance they provide employees—throughout the year—enhances performance, then annual reviews could be part of a strategic advantage.

Key questions: Are managers accountable for and trained to enhance employee performance? Are excellent managers identified and rewarded for their efforts?

These days, HR has more trends than the fashion industry. Before adopting the latest fad, make sure it fits with your strategy, culture, and managerial style.

The Value of a Continuous Performance Management Process

By Rachel Weeks, Senior Director, Marketing, HealthcareSource (www.healthcaresource.com)

The once-a-year performance review provides a formal opportunity for manager and employee to celebrate accomplishments, discuss challenges, and set annual goals, but performance management is most effective when it’s a continuous process rather than a one-time conversation at evaluation time. Many health-care organizations are discovering that providing employees on a continuous basis with mentoring and coaching opportunities that are aligned with their annual goals leads to greater employee accountability and better performance.

Phelps County Regional Medical Center in Rolla, MO, is one such organization. It has developed coaching and mentoring programs that increase the touchpoints between managers and employees. These initiatives improve retention among high-performing team members, increase employee satisfaction through more targeted professional development, and enhance employee accountability by combining goals with frequent feedback.

Phelps’ C3 Conversations program is a structured communication process that creates a bridge between formal performance evaluations and the ad hoc feedback provided through “managing by wandering around.” Twice a year, managers are asked to hold brief (15- to 20-minute) C3 conversations with every employee. C3 refers to discussions targeted at three levels of performance:

Commitment conversations occur with high performers.

Coach conversations occur with middle performers.

Counsel conversations occur with low performers.

The C3 program promotes transparency about performance expectations for both managers and employees. To support the initiative, the HR team created a clear set of criteria that define whether a staff member is considered a high, middle, or low performer. The criteria have proven to be beneficial in several ways:

• Managers use a consistent approach to coaching. With the criteria, supervisors know what to look for as they evaluate employee performance, and every manager works from the same set of standards.
• Employees have insight into how they are evaluated. All employees have access to a C3 FAQ document on the organization’s intranet, and understand how their work is assessed. Using the same criteria across departments makes it less likely employees will claim they have been unfairly treated.

• The criteria can be incorporated into management tools. Supervisors can evaluate performance against the criteria and determine which type of conversation is most appropriate for each team member.

“C3 conversations complement our performance management process,” says Frank Lazzaro, III, administrative director, Human Resources at Phelps County Regional Medical Center. “They don’t replace formal evaluations, but they help correct poor performance, sustain good performance, and increase performance levels overall within the organization.”

Performance management is an ongoing process that should be top of mind all year round. Mentoring and coaching programs are an effective way to provide continuous feedback to front-line employees, managers, and leaders. These techniques bridge the gap between formal evaluations and help team members focus on ways they can improve their performance. The results include better patient care, greater employee accountability and satisfaction, and lower turnover among the strongest performers.

Case Study: You In Review at Intelicare Direct

By Gabriel Bristol, CEO and President, Intelicare Direct

We created You In Review at Intelicare Direct because we were dissatisfied with both the traditional annual review process and the results it yielded. Like many companies, we had evolved into a space where we felt the traditional process was setting us back instead of moving us forward, and we determined something needed to change.

While there are many options that “disrupt” the traditional method, as we spent more time investigating these alternatives, we came to the conclusion that regardless of the modality, none of these newer methods of performance evaluation met our criteria. Any new process would have to turn the traditional process on its head, as well as fit with our “free-thinking” culture.

It’s often said “necessity is the mother of invention,” and that’s as good an analogy as any because You In Review has become a labor of love.

At its core, You In Review is a self-performance assessment that requires employees to grade themselves by evaluating their overall performance while highlighting their successes, as well as their setbacks. Employees review their year and call out what they did well and what needs work. Then they present their findings to their senior leader in a creative, non-traditional way.

The rules of the process require that no more than 50 percent of the presentation be in writing. That means there’s room for creativity: We’ve had employees make a puppet show, a video, a large collage board, slide decks, and some include a combination of many elements.

But the rules don’t only apply to the employees reviewing themselves. They also apply to the manager giving the feedback—this part is key. The manager must display similar creativity and follow the same rules.

The benefits have been clear. By putting the onus on employees to review their year, they highlight things managers may well have overlooked or even forgotten about. In this way, the information being provided is more complete and helps the manager give a more thorough evaluation. By requiring the manager to be as creative as the employee in responding to the review, employees have stated they actually look forward to the evaluation.

Further, by requiring employees to be proactive in analyzing their growth opportunities, managers are clear about how self-aware employees are, which allows them to focus on other areas or only gently touch on the ones the employee pointed out.

Since initiating You In Review, we have seen a productivity increase in the time immediately following the feedback portion of the process, where typically we would see a decrease when following the traditional format. This has resulted in a nice boost to our bottom line. We also have seen a significant bump in morale, and that’s perhaps the best benefit of all.

4 Metrics That Will Allow You to Ditch the Annual Performance Review for Salespeople

By Tom Searcy, Founder and CEO, Hunt Big Sales (www.huntbigsales.com) and author of books including “RFPs Suck! How to Master the RFP System Once and for All to Win Big Business”

New salespeople are often like tourists—here for a little while, gone tomorrow. If they are poor performers, you are moving them out quickly. If they are great performers, they are getting poached or are moving on. In fact, a recent survey by Glassdoor of 1,000 salespeople found that more than 68 percent admit they plan to look for a new job in the next year, and 45 percent said they plan to look in the next three months. Only 19 percent were sitting tight with no imminent plans to switch. The reality is both you and your salespeople are aware that your relationship is likely not forever; however, the traditional annual performance review process is designed to provide feedback for employees who likely will have a long-term career with your company.

So what should a performance review look like for sales professionals who are often on a shorter timeline than other non-sales employees? Are performance reviews for sellers even necessary?

The good news is, the long, drawn-out performance reviews that demand hours of time from supervisors and employees are not necessary for evaluating salespeople. However, before you write off performance reviews for salespeople altogether, keep in mind that government requirements, lawyers, and, of course, the compliance police—Human Resources—still want you to do some type of review to protect your company from lawsuits and the arbitrary and unfair evaluation of employees. And the reality is, a performance review can be a useful tool for developing sellers, even if sellers do not stick around forever.

A performance review can help you weed out the underperforming sellers and further develop your top sellers. The key to successful sales performance reviews is to help sellers develop in a short period of time without investing countless hours filling out unnecessary performance review documents and holding performance review meetings. This means your performance reviews for sellers should occur more frequently, but be done more efficiently. The key is to keep seller performance reviews, short, equitable, and factual.

Here are the four key metrics you can use to evaluate your sellers in an effective, yet efficient manner:

Performance: Yes, we need to use the merit-based criteria of sales attainment. This means a seller needs to be held accountable for reaching an amount of established revenue targets within an established period of time. This is not the same as simply tracking a measured effort, such as number of meetings attended or forms submitted. We are talking about cold, hard dollars.

Growth: Every salesperson who has been with the company longer than one year should be expected to increase his or her customers’ revenue either by revenue from current products or services sold or by additional products or services sales. If they do not have that responsibility, then their role is not one of sales. They are service representatives and they should be called such and managed as such.

Margin: Salespeople have to sell what your company offers at the rate you sell it for the margin your company needs. If the only way a salesperson can close a sale is by discount, then that person is not selling. That person is participating in an exercise of bidding. He or she has become a participant in a reverse auction. If your employee does not differentiate your offering by quality, benefit, or nature of solution, then your employee is a bidder, not a salesperson.

Yield: In the movie, Silverado, the sheriff refers to a visitor as being “hard on the peace and hard on the furniture.” Good salespeople are often hard on the organization because they are pushing to get the sale, as well as trying to grow business. The yield had better be there to justify the investment. They have to be the best to get the support. If they are just thunder and lightning with no rain, they have to get measured for the disproportion of what it costs for their contribution.

You may think after reading this that I feel salespeople are different from non-sales employees and should be measured differently. You only feel that way because you are paying attention. The fact is that most salespeople won’t be with you for long. The annual performance review does not develop sellers. It just documents the efforts you already been have making to develop them. You have to do performance reviews for compliance, but they may as well count. Make them factual, fast, and effective.

1. Annual: Individual employee performance review takes place.
2. Every other year: The pulse of the organization is taken through a lengthy survey.
3. Three to five years: Organizations conduct a 360-degree feedback process.

Stop and think about this: Organizations are getting feedback from their customers and clients literally every minute, but they get feedback from their own employees only once every one to five years. Wait. Seriously? What is going on?

Business processes have become entrenched to support this annual employee feedback ritual, but in order for organizations to thrive in today’s “instant information” age, real-time feedback from employees is vital. After all, employees are the engines that drive customer experiences—it’s the people who build the products, manage rollouts, and cultivate all-important relationships. Without a connected and fully engaged workforce, an organization cannot achieve sustained success. So why not get their input more frequently?

Google has been at the forefront of discussions about the value of employees and how to maximize their contributions. Laszlo Bock heads Google’s People Operations area (commonly known as HR). In 2011, with most companies still recovering from the 2008 crash, Bock was writing articles about the importance of eliciting real-time feedback (https://www.thinkwithgoogle.com/articles/passion-not-perks.html) and using it to determine eight characteristics of excellent managers (http://www.realtimeperformance.com/RealTimeLeadership/2011/the-8-most-important-qualities-of-leadership-at-google/). Google regularly checks in with employees regarding their managers, then provides coaching to managers to become better. In sum, it listens to people and takes action on their input. And it does so with enough frequency and regularity that it is part of its culture.

Naysayers could reply, “Well, Google has billions of dollars in profits each quarter. It’s easier to focus on these soft topics when your bottom line looks so good.” OK, but do we have a “chicken or the egg” debate? Did Google’s respect for its people and desire to create a compelling culture attract the best talent that enabled it to succeed, or did the profits it generated each year liberate it to start thinking about culture? Either way, Google set the bar when it comes to recognizing that employees are the lifeblood of its business and consistently has challenged outmoded business processes that stand in the way of its values.

I’ve occasionally heard comments from organizations, such as: “There’s no real value in getting feedback from our employees and continuously developing our culture. We don’t have the time or resources, especially given the rate of turnover with our employees. Too risky.” But what is the potential cost to your culture, organizational productivity, and brand if disenchanted employees with no outlet for their voices choose to stay? This reminds me of Zig Ziglar’s quote: “There is only one thing worse than training employees and losing them, and that’s not training them and keeping them.”

The voice of the employee is like water: It eventually will find a crack—or, if pent up for too long, it will make its own.

Don’t Wait Until It’s Too Late

No surprises: Just as Umami Burger is trying to get out ahead of potential negative feedback before it appears on sites such as Yelp and it’s too late to do anything about it, organizations are faced with understanding employees’ needs before their feedback appears on sites such as Glassdoor.com. Waiting until it’s too late can leave an organization scrambling and limit potential solutions to mitigate the damage.

It’s been said that the only true future competitive business advantage will be a fully connected and engaged workforce. That can be true for your organization, when you take a real-time and transparent approach to tapping into employee feedback. Organizations that are staying ahead of (and minimizing and preventing) negative feedback have embraced the paradigm shift from an annual check-in process to a real-time model. Many organizations already have done this with their clients and customers, and it made sense to treat their employees with the same respect.

My Umami burger was delicious, but the reminder that all voices (customers’, clients’, and employees’) are important gave me lasting satisfaction.