Ending yearly performance reviews for white-collar employees is the latest hot trend in management. Accenture, one of the biggest white-shoe consulting firms, shocked the world of white-collar work when it announced last month that it would eliminate annual reviews. And Accenture is now being quickly followed by Deloitte, another mammoth professional services firm and, like dominoes, Adobe, Gap, and even General Electric. Ten percent of Fortune 500 companies are joining in the trend. The dominoes are really falling.
This shift has been almost universally praised. Many BigCo employees think the yearly performance review process is somewhere between suboptimal and a sham. It's viewed as political and privileging some metrics at the expense of others, more or less arbitrarily. Reviews gum up the works, as employees spend the months leading up to them politicking for position instead of doing actual work. Deloitte said what clinched its decision was an internal survey in which 60 percent of employees said they thought yearly performance reviews were useless.
The new trend is being greeted by workers as liberation. But is it all that?
First of all: Ditching annual reviews and replacing them with something else won't change much for the better. All performance evaluation schemes suffer from similar flaws. Any "objective" metric is only going to be a proxy for the thing that you actually want, and human nature dictates that any metric you choose will end up being gamed by employees. In any work, but perhaps particularly white-collar work, there are countless different variables to what constitutes "good work," and rewarding one metric will end up coming at the expense of the others. As the entrepreneur Jim Manzi wrote in a highly enlightening post, many companies end up trying to fix this problem by coming up with evermore (and evermore elaborate) metrics, to the point where the whole system becomes utterly incomprehensible. Employees either revolt or become unmotivated. More problematically, if we're honest, in many companies, performance reviews just provide a "factual" basis to justify managers' pre-existing gut feelings about employees, rather than to actually objectively ascertain performance in some enlightening way.
The problem is structural. For doing anything, humans have two sources of motivation: internal motivation (self-explanatory), or external motivation (a punishment or a reward). And as we all know from personal experience, internal motivation beats external motivation each and every single time. This is why people have hobbies, and are so often more invested in them (and more talented at them) than their work. The scientist and author Alfie Kohn has shown how external motivation schemes repeatedly destroy motivation and results, but are still used by companies, in part because they do provide a short-term boost in results. Perhaps more importantly, companies use these tactics because stoking internal motivation in employees is a lot harder than just saying, "You'll get a bonus if you hit this sales quota this year."
Whatever ends up replacing yearly performance reviews will still suffer from the same problems and biases as yearly performance reviews, or any performance review scheme, did.
There are other issues, too.
One factor underlying this change has been the greater magnitude of data available to managers. In our everyday lives we are getting data-driven instant feedback on what we do all the time — likes on Facebook and Instagram, retweets and so on. Many people see the world of work (at least, white-collar work) moving in the same direction. The pitfalls of such an approach — using more and more data to give more and more feedback, asymptotically approaching real time — should be obvious.
For one thing, this obsession with immediate data leads to an increase in short-termism in corporate culture, where it is already a huge problem. If you have several assignments over the course of a year and you do well but screw up one of them, the yearly performance review should, at least in theory, show the more accurate picture of you as a generally good worker. But if you're rated assignment after assignment, when the screwed-up assignment rolls along, that's the last thing anyone will remember.
The other problem, connected to the first, is an increase in pressure on employees. A much-publicized feature in The New York Times sought to expose Amazon's corporate culture as squeezing employees dry like lemons. The story was only partially fair, but as Vox's Ezra Klein noted, this is part of a much larger management trend. Constant feedback also means constant pressure, and living on deadline all the time. Getting rid of yearly performance reviews might just end up with employees getting the equivalent of a yearly performance review every week. This is not good for employee happiness and, ultimately, productivity.
You can't swing a cat through a conference room these days without hitting someone babbling about "Big Data." HR people are salivating at the prospect of all this data helping them micromanage employees like they're the most effective lab rats in history. But employees aren't lab rats. They're human beings. And human beings produce outstanding work when they are internally motivated.
Dealing with that reality is a lot harder than running everyone through a spreadsheet.