’Tis the season for performance appraisals. Or is it?

Is the annual performance review going the way of dial-up internet access? HRM finds out more about the shifting trend.

Research by The Corporate Executive Board (CEB) has found that 95% of managers are dissatisfied with the way their companies conduct performance reviews, and nearly 90% of HR leaders say the process doesn’t even yield accurate information.

“Employees that do best in performance management systems tend to be the employees that are the most narcissistic and self-promoting,” said Brian Kropp, the HR practice leader for CEB. “Those aren’t necessarily the employees you need to be the best organisation going forward.”

Sarah Dunn, Head - People Resources (Asia-Pacific), Adobe, agrees, saying, it’s beneficial for organisations to conduct a thorough reality check on their performance review process from time to time.

“Before Adobe transformed its performance review process, we’d received feedback that our past appraisal format didn’t allow for sustained or ongoing feedback, and was instead ‘stack ranking’ individuals against each other, Dunn explains.

“This was not a desirable situation, and we felt that annual performance reviews limit strengths and areas of improvement to just once a year.”

“This was at odds with our belief that employees need ongoing feedback so they know where they stand, and so that they can make improvements and stay engaged throughout the year.”

“Additionally, performance reviews that stack rank employees create an environment of competition, not teamwork. They stifle innovation in an organisation like Adobe, which needs and encourages individuals to be at their creative best.”

Adobe found that globally, its managers were collectively spending in excess of 80,000 hours on a review process that wasn’t yielding a good return. That was equivalent to hiring 43 full-time employees. “We asked ourselves whether the entire exercise was truly worth the effort – and it wasn’t, so we declared the end of performance reviews at Adobe in 2012,” says Dunn.

Appraisal transformation

The performance appraisal system is increasingly being transformed. Companies including Accenture, Gap, Medtronic and Adobe have gotten rid of annual performance reviews and rankings and have adopted a more regular “pulse-check” approach to performance management.

Consulting and accounting giant Deloitte is piloting a new programme in which rankings will disappear and the evaluation process will instead unfold incrementally throughout the year. The new Deloitte framework is based around: check-ins periodically with each employee; a quarterly pulse survey of 10 questions that each manager sends out to their team to get feedback; a performance snapshot every three months done by the manager via a four-question survey online (two of which simply require ‘yes’ or ‘no’ answers) about each employee; and then, quarterly talent reviews.

“There’s no forms… but we’re running regular conversations between the manager and the employee,” Alec Bashinsky, head of people and performance at Deloitte in Australia, told Business Insider. “And we’ve found the more the check-ins, the greater the employee engagement.”

For Adobe, the results were immediate. Starting at the end of 2011, Adobe’s business was transforming to provide cutting-edge and real-time products, moving from a boxed software company to introducing a strong subscription service for its digital media business.

“We were moving towards a more agile and flexible cloud subscription model,” Dunn explains. “Although the organisation was going through an overhaul in its customer offerings, the changes in our business model were not reflected in our people practices; how we evaluated performance, supported employee growth, and cultivated a team environment.”

In particular, the ongoing bell curve appraisal system was found to be a “rear-view” process of looking back on how the year was. “We realised that we were not really helping people improve their performances, nor encouraging faster innovation,” Dunn shares. “Additionally, we wanted our systems and processes to help us retain our talent and to keep them engaged on an ongoing basis.”

In the summer of 2012, Adobe decided to abolish the usual bell curve appraisal in favour of a more lightweight, agile and productive “check-in” system, giving more ownership and control to the individuals for their growth in the organisation. The check-in is an informal system of ongoing, real-time conversations and feedback between an individual and their manager and works on three parameters of goal-setting, feedback, and growth.

“There are no stringent steps and no prescribed timing and no forms to fill out and submit to the HR team,” says Dunn. “Managers decide the frequency of meetings and in what format they want to set goals and give feedback.

“We also invested in training the managers and guided them to focus on goals, objectives, career development and strategies for an individual’s improvement, instead of dwelling on an individual’s shortcomings.

“There is no comparison of the individual to their peers,” she adds. “All-in-all, the system is owned by the employee and supported by the manager, and encourages team work and collaboration.”

The benefits of the check-ins have been felt across the company’s global operations. In Asia-Pacific, its introduction resulted in a significant reduction in the number of working hours, based on the feedback from people managers across the region. Internal studies show employee engagement levels have also improved.

“Check-ins have clearly been a welcome move and it’s heartening to see the overwhelming response from the employees,” says Dunn. “Employees get a sense of ownership and control over their destiny and growth, and this is a clear testament to the success of the new system.”

Towards reinvention

In the globalised economy of today, the challenges to attract and retain top talent is greater than ever. There is also a change in the demographics of people being hired; a clear increase in the millennial workforce who enjoy more flexibility in the way they work. These younger workers also seek instant recognition and faster growth, and demand absolute clarity in people practices.

This is also a generation that is social and mobile all the time; and therefore, needs to be engaged differently.

“In light of evolving HR trends and challenges, HR managers today need to take stock of their people processes, and their appraisal system,” says Dunn. “Although the bell curve appraisals might still work in certain sectors (for example, in manufacturing), new generation technology products need to adopt a progressive mindset with regards to their appraisal system.”

Still, there is no strict rule or system to adopt. Dunn says HR managers need to devise the right appraisal system or mechanism based on the nature of work and the composition of the workforce. “They should keep in mind various aspects,” she advises. “They should make sure that the appraisal system is transparent; helps align organisation goals to the individual’s career objectives; encourages fluid feedback and discussion on an ongoing basis; and avoids stack ranking.”

One size won’t fit all

Despite all the talk of overhauling performance appraisal systems, not every company can just go ahead and dump the annual performance review process, says Foo Chek Wee, Group HR Director for Zalora in Southeast Asia and Hong Kong. “Until you’re in a position to rethink your entire performance review process, you need to ask yourself what can you, as a people manager, do to achieve meaningful performance review sessions,” explains Foo.

“As people managers, we do not have to wait for a sea of change to start having constructive feedback sessions with our own people,” he advises. “We can execute a continual stop-start feedback technique immediately and we’ll be amazed how such a simple approach can bring positive change.”

Analysing the Workday advantage

Sandeep Aggarwal, Chief Financial Officer of Aon-Hewitt Asia-Pacific, shares his thoughts on the Workday finance and HR analytics platform. He says the cloud-based system is intuitive and easy-to-use, but still provides powerful insights across the functions.

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