Why corporate America is ditching annual performance reviews
Everything you need to know, in four paragraphs
The best insights and commentary, from all perspectives, in four paragraphs:
One of the biggest companies in the world is doing its employees "an enormous favor," said Lillian Cunningham at The Washington Post. The massive consulting firm Accenture is eliminating annual performance reviews and rankings for its 330,000 employees worldwide. The once-a-year review process is just too time-consuming and expensive, Accenture CEO Pierre Nanterme said in an interview, and "the outcome is not great." Instead, the firm will implement "a more fluid system" of timely feedback based on managers' discretion. Accenture isn't the only major company to "ditch dreaded annual reviews," said Mandi Woodruff at Yahoo Finance. Microsoft got rid of its annual ranking system in 2013; Gap now asks managers to have monthly conversations with employees. Both Google and Yahoo have a quarterly check-in system based on measurable, public goals set by employees.
Job evaluations have been happening as far back as 3rd-century China, said Vauhini Vara at The New Yorker, and "hated as long." And not only has the annual ritual been long resented, but it's also increasingly been shown to offer little bang for the buck. Repeated studies have found that "even accurate feedback can feel biased and unfair, making people less motivated and hurting relationships between supervisors and subordinates." A 2013 study found that even employees motivated by a desire to learn on the job were often blindsided and despondent over constructive criticism they'd received. As one management expert put it, the vast majority of annual reviews "end up as a source of anxiety and annoyance rather than a source of useful information."
That's why we at Deloitte decided this spring to completely redesign the way we rate performance, said Marcus Buckingham and Ashley Goodall at Harvard Business Review. Our consulting and advisory firm employs more than 65,000 people, and when we tallied the number of hours managers were spending on reviews — completing the forms, holding the meetings — we realized they consumed close to 2 million hours a year. The firm ultimately wants reviews that don't focus excessively on the past, but rather "fuel performance in the future." Going forward, every team leader will now check in with each team member once a week. Managers will evaluate each employee based on a handful of future-focused questions: Do you want that person on your team? Is he or she ready for promotion?
I worry that firms are eliminating annual reviews "without understanding the cascading implications," said Susan Galer at Forbes. How do workers get raises? Companies that abruptly reform their rating systems often "don't know how to handle succession and compensation," which can be just as bad for morale as time-wasting reviews. There's a great irony in all of this, said Lucy Kellaway at Financial Times. For years, Accenture and Deloitte have "charged fat fees for stuffing their clients with dreadful appraisal systems." Now they're abandoning the very systems they hyped. How about companies hiring "managers who are able to manage, and who are good at telling people how they are doing"? Then the appraisal-system charade can finally "be over for all of us."