The performance review isn't dead. Sure, it's been given a bad rap, but only because it was allowed to lurk like a ghoul from last century; a musty Halloween outfit that was rolled out once a year. All constricted by laborious process and staggering around in a stupor of preoccupation and retrospection.
The thing is, performance reviews (or performance appraisals) actually work. They can be an invaluable tool for bringing out the best in your people, strengthening the employment relationship and boosting achievement, morale, and productivity across the business.
They just have to be done well.
So banish that old deadweight zombie process and join us on an exploration of the oft-maligned performance review and see how it can best serve your people and your company.
Many managers, bosses, and business-owners will know this one. It starts with the simple words: “It's time for your performance review.” Your employee stops in her tracks. You can't work out if the reaction is nervousness, trepidation, apathy, or something more hostile.
Perhaps you were giving her a heads-up and asked her to prepare with some form of self-evaluation. Fill in some scores. Write some notes. Meanwhile, you waded through a long analysis of her performance for the past year, poring over a ratings system while trying to remember details of wins, positive action you want to encourage, or examples of behaviour you'd like to improve.
One main upshot was finding justification for approving or denying her a pay increase, but by the time the review meeting came around, you were both so bogged down by the process the only thing you really cared about was getting it over with.
Or perhaps you took a more unbuttoned approach. No worries about preparation. Just get together and muddle through an ad-hoc review that leaves neither person any wiser, or worse, exasperated and even a bit resentful.
Either way, you had to wonder why you bothered. Boo to the performance review.
HR commentators have been ringing the performance review's death knell for years, and these sorts of experiences are symbolic of the evidence they cite. Confronting, stressful, aimless, costly, onerous, but above all – the theory goes – performance reviews are ultimately ineffectual at delivering on their basic raison d'être: improving employee performance.
If managers and employees unanimously hate doing performance reviews, then it's a pretty good sign that something is out of whack. So why not ditch the whole pointless process altogether (and there's no legal obligation to do them, anyway)?
Some companies have. Some business – especially small ones – have never done performance reviews to begin with.
But there is evidence from NZ and abroad that employees don't perform as well at companies that don't do them. A SEEK survey of 4000 New Zealanders found that 57% of respondents participate in some form of performance review process. 58% of those that don't do performance reviews believed their workplace should implement some sort of system and 51% felt not getting performance feedback was detrimental to their development.
The NZ results support a global study of nearly 10,000 employees by research and advisory company CEB (now Gartner) that found employee performance and engagement drops when performance ratings and reviews are removed. Not exactly good news for any business that wants a team of motivated, loyal people.
Everyone wants to succeed and improve. Just as you want your business to flourish, your employees want to grow too. But in the busy, daily work environment, it can be hard to get an accurate gauge of how your people are performing against personal and business goals without having some sort of formal appraisal process (even a rudimentary one).
Good performance reviews give you a vital opportunity for you and your employees to reflect on performance and to get together to discuss it. Feedback is essential to improvement. It helps people understand their strengths and areas that may need development.
In the SEEK survey, 91% of those that participated in performance reviews saw real value in getting feedback (on the flip-side, those not reviewed said performance feedback would help them to better understand their own performance and how they could improve).
It's about recognising when a job or task was done well or when (and how) it could've been done better. It shouldn't be about money. In fact, separating decisions on pay from performance reviews lessens the emotional load so the conversation can stay focussed on a person's achievements and where they should put their attention going forward.
It may be that employee needs (and wants) to gain new skills or get further training. Performance evaluations are a great way to spot people's talents and to work on a plan that will nurture them.
If there are any issues that are impeding productivity, an honest review process can help highlight them and you can then work on mitigation strategies before there are larger problems that cause disruptions or impel an employee to quit, or need discipline or dismissal.
It's all part of creating a team culture that supports and rewards achievement, and aims to build on it collaboratively. Motivated and valued people want to excel, which can only benefit the business as a whole. Without performance reviews, people may just meander along doing what they've always done, in the ways they've always done them. Same performance, same results.
Max Fashions is one of NZ's leading fashion retailers, with over 320 employees spread across 40 stores and its head office in Auckland. Tracking and evaluating employee performance using an old-school, paper-based approach proved to be increasingly inefficient and imprecise for a company with so many staff and locations, so switching to state-of-the-art HR software led to a transformation in Max's performance management.
The service provides a modern, user-friendly performance review framework that has reduced administration and enabled the business to focus on regular, meaningful conversations with its workers. This has boosted employee motivation, engagement, and overall productivity.
Unfortunately, many businesses go through the motions of performance reviews without understanding the need to get them right. Just because you put your employees' performance through an evaluation process doesn't mean you're guaranteed good results.
In fact, having a performance review system that is badly designed and delivered could be damaging rather than improving your employees' and your business' progress.
Back in 2015, Deloitte found that 82 percent of the companies it surveyed for its Global Human Capital Trends report thought their employee review processes weren't worth the time they spent on them. In the following year's report, more than two-thirds of surveyed companies were redesigning their performance management practices.
This is good news. The team at MyHR sees a lot of errors and poor practices in evaluating and shaping employee performance, and the mistakes often limit the value of doing it at all.
We've already mentioned the error of using performance reviews to approve or deny a pay raise. This traditional approach can reduce the review into a salary negotiation, potentially pitting your employees against each other and management. Rather than working as a team and focussing on the goals of the company, people will be more interested in their own ambitions. The potential for disgruntlement is also high if things don't go their way.
Only holding reviews annually presents a whole raft of issues, not the least of which can be the burden of making the process overly formal and complex. Employees and managers then end up bogged down by paperwork, turning the review into a box-ticking exercise that is heavily slanted towards past performance (if you can accurately trace it) instead of ongoing achievement.
Speaking of paperwork, if you are still doing performance reviews manually, on paper - even partially - you are spending unnecessary time on form-filling, collating, analysing, and filing. Good software can automate a lot of this for you.
The more laborious the appraisal process, the more your workplace may be inclined to use the same measures and methods for all employees and all roles, in an effort to claw back a bit of time. Your business should be a team working to achieve the same objectives, with each employee playing a role within it. A rigid, blanket review system won't provide an accurate assessment of each person's performance, their talents or areas for improvement, and you will also miss an opportunity to link individual performance with overall company strategy.
Then there's the problem of the employer or manager being judge and jury, rating employees without input from others – especially that of the employees themselves. Top-down, one-sided evaluations can be clouded by bias and may provide only limited insight into the reasons for good or bad performance, be they personal, collective, or company-wide. You also risk damaging people's morale and making it harder to get their buy-in to any future goals.
In a business world that's rapidly changing, companies recognise that they need to adapt. There's little point in having a performance review system that hasn't changed with the times and what employees now need to succeed.
Fortunately, many companies across the world have recognised the need to overhaul their dated annual performance reviews and are instituting more dynamic strategies. Zombies begone! Some pundits are even calling it a revolution.
The modern performance evaluation is about measuring performance as accurately as possible and then getting together regularly to share results and discuss ongoing development.
Open, two-way conversations are key. People want to work in an environment where they feel supported, respected, and valued. They want to take pride in their job, to be told when they are doing well, and given assistance if there are areas where they could improve.
Every employee is an individual, so your performance review system should be flexible enough to recognise their skills, interests, and aspirations so they can be developed and rewarded. If the review hones in on weaknesses without charting a practical course for improvement, there is a real risk of discouraging rather than motivating your people.
Likewise, measuring every single aspect of an employee's efforts and producing a lengthy review like a school report may be counterproductive (not to mention tiresome). Forms and documents are useful for defining and communicating expectations, assessments, and results, but they shouldn't come at the expense of honest dialogue.
Involve the employee in performance planning. Agree on several clear, quantifiable objectives that are relevant to each person's role along with the skills needed to achieve them. This will ensure the review is both effective and easily-achievable. Include a plan for development activities that you and the employee will complete to improve skills, achieve the objectives, and enhance their career.
Don't wait until scheduled performance review meetings to give or receive feedback. Not all conversations have to be formal. The process should be continuous, helping people understand their strengths and the connection between their performance and the business' success.
And if things change, either inside or outside the business, your performance appraisal system should be able to adapt. Business goals can shift. An employee might develop new interests or want to alter their hours. By working together, you can help ensure your people stay motivated and committed.
People-management skills are vital to all of this, so your senior leaders and managers may need support and training, too. Be objective. If practice shows there are aspects of your system that aren't working, don't be afraid to modify or jettison them.
Help is out there. Good software will help with digitisation and automation, lessening the admin load and making it easy to create, update, and complete performance reviews. Experts that understand good performance management can ensure your system is tailored to the goals of your team members and the overall business.
Reshaping performance reviews into simpler, more dynamic management systems may be challenging, but companies are reaping the rewards. Deloitte's 2017 Global Human Capital Trends report found that 90 percent of companies that have retooled their performance review systems see direct improvements in employee engagement, and 83 percent say they see the quality of conversations between employees and managers going up.
Don't settle for less. Your performance review processes should have a beating heart that connects a team of engaged, skilled people, and a head that steers and propels everyone towards shared success in the short and long-term.