Is it time to do away with annual performance appraisals?
The announcement that General Electric (GE) has joined a list of high-profile companies that are getting rid of annual performance reviews has sparked a national dialogue among HR professionals about the usefulness of such appraisals—and the alternatives available for deciding who gets pay raises, bonuses and promotions (Wilkie, 2015).
Some companies that have stepped away from annual reviews are, in addition to taking other steps, encouraging more frequent manager-employee check-ins—quarterly, monthly or even weekly. This could be as simple as a short meeting or a coffee break.
In a knowledge economy, organisations rely heavily on their intangible assets to build value. Consequently, performance management at the individual employee level is essential and the business case for implementing a system to measure and improve employee performance is strong. Management time and effort to increase performance not only meets this goal, it also decreases turnover rates.
How do we manage performance within the organisation? The most common part of the process, and the one with which we are most familiar, is the process of the performance appraisal, or evaluation. However, the performance appraisal process is not the only thing that’s done in performance management. Performance management is the process of identifying, measuring, managing, and developing the performance of the human resources in an organisation. Basically we are trying to figure out how well employees perform and then to ultimately improve that performance level. When used correctly, performance management is a systematic analysis and measurement of worker performance (including communication of that assessment to the individual) that we use to improve performance over time.
Performance appraisal, on the other hand, is the ongoing process of evaluating employee performance. Performance appraisals are reviews of employee performance over time (typically on an annually basis), so appraisal is just one piece of performance management.
The Business Case to Do Away With Performance Appraisals
Numerous articles have been published extensively in recent years to support the proposition or call for getting rid of the Performance Review. The fundamental premise for this is that performance appraisals are one-sided analyses by the manager of what the employee is doing wrong. We believe that if the process can become a two-way communication between the manager and the employee, a performance review becomes a “performance preview”. The boss and the employee “have conversations” that allow the manager to become a performance coach for the employee.
Generally in the design of performance appraisals, one-way communication is one of the key features of the process. However, we do need a two-way communication between the manager and the employee. If it’s one-way, the process has very little chance of improving the employee’s performance over time. In addition, one of the other purposes, motivating the employee would require a continuing conversation between the manager and the employee which in fact resulting in the need for performance coaching. The performance management process does not occur one day a year. If it is going to be successful, it has to occur continuously throughout the year as the manager and the employee have conversations about ongoing performance on a regular basis.
An appraisal process that is done correctly (and most aren’t) is an absolutely necessary piece if the organisation is going to be objective in the management and evaluation of its hr which is indeed one of the most critical pieces of organisational success today. In fact, we believe that if you are not going to do it right with accurate measures (KPI) and coaching, then do away with performance reviews. This is what effective managers and leaders have been saying for the last several decades. If we are going to be successful in improving employee performance over time, two-way conversations have to occur that allow employees to raise their own level of self-awareness and identify problems and issues that prevent them from being as successful as possible through the process of performance coaching. If coaching occurs, individual performance is almost certain to increase, and as a result sustainable organisational performance will be achieved in the longer term.
In summary, the following are very good reasons for abolishing the Annual Performance Reviews:
- Employees need and want regular performance feedback (daily, weekly), so a once-a-year review is not only too late but is often a surprise. Regular coaching is the key to alignment and performance.
- Managers cannot typically “judge” an entire year of work from an individual at one time, so the annual review is awkward and uncomfortable for both manager and employee.
- Manager-employee relationships are not 1:1 like they used to be. We work with many leaders and peers during the year, so one person cannot adequately rate you without lots of peer input.
- While some employees are a poor fit and likely are poor performers, these issues should be addressed immediately with performance coaching, not at the end of the year.
- Some companies really do have a lot of high performers, so forced ranking eliminates great people and damages the culture of a results-based high performance organisation.
- People are inspired and motivated by ongoing positive, constructive feedback – and the “appraisal” process almost always works against this.
- The most valuable part of an appraisal is the “development planning” conversation – what can one do to improve performance and engagement – and this is often left to a small box on the review form.
Developing Managerial Skills in Delivering Performance Coaching
Managerial Coaching is about developing and maximising an individual employee’s potential which will consequently impact positively on the organisation’s performance. It is about more inquiry (ask) and less advocacy (tell) which means helping that individual to learn rather than teaching. Coaching sets out to embrace the employee as an individual and understands the organisational context in which the employee operates. It seeks to achieve alignment between the individual employee, team and organisational goals (Bawany, 2015).
In today’s business context, the importance and practice of managerial coaching is changing. Once focused primarily on improving the performance of employees who have fallen below standard or on providing opportunities for those with the highest potential, coaching now plays an expanded role, due to a greater appreciation of the value of an organisation’s knowledge and human capital. To achieve critical results and remain competitive, organisations now see coaching not only as a means to shape individual performance but also, increasingly, to build broader organisational capacity.
This new perception means that coaching now needs to be seen as a type of investment in the knowledge capital of the organisation, and that employees are like a portfolio of talent in which the manager needs to invest time and energy. To maximise the impact of coaching, managers need to review their portfolios regularly and determine those skills and capabilities that each person needs in order to have the greatest impact on business results. In other words, managers need to help each employee focus on developing those capabilities that will contribute most to both individual and organisational success.
This shift in perception and practice has important implications for today’s managers, who may often feel hard-pressed to attend to those few employees who really need help, let alone to an entire team that is often far-flung and diverse. What is required to help managers make the right investment is a clear definition of coaching, as well as some core coaching practices that can be readily applied in today’s time-compressed business environment.
How the GROW Model Works
The GROW Model is deservedly one of the most established and successful coaching models. Created by Sir John Whitmore with his colleagues in the 1980s, it is popularised in his bestselling book, Coaching for Performance (Whitmore, 1999).
The GROW Model is an acronym standing for (G)oals, (R)eality, (O)ptions and (W)ill, highlighting the four key steps in the implementation of the GROW Model. By working through these four stages, the GROW Model raises an individual’s awareness and understanding of:
- their own aspirations
- their current situation and beliefs
- the possibilities and resources open to them
- the actions they want to take to achieve their personal and professional goals.
By setting goals which are inspiring and challenging as well as specific, measurable and achievable in a realistic time frame, the GROW Model successfully promotes confidence and self-motivation, leading to increased productivity and personal satisfaction. The Will element of the fourth stage in the model is the barometer of success. It relates to volition, desire and intention.
Utilising a deceptively simple framework, the GROW Model provides a powerful tool to highlight, elicit and maximise inner potential through a series of sequential coaching conversations. The GROW Model is globally renowned for its success in both problem solving and goal setting, helping to maximise and maintain personal achievement and productivity.
The GROW Model has proved successful all over the world to a diverse mix of people with a variety of backgrounds and experiences. It forms the most common basis of coaching in many organisations globally. The GROW Model is now one of the most popular principle pillars utilised within the international coaching community as a whole, due to the outstanding results it helps people to achieve personal success as well as within global organisations.
Organisations need to reinvent their current performance management approach once they realise that their current process for evaluating the work of their people, training them, promoting them, and paying them accordingly is increasingly out of step with their corporate objectives. This is especially so if it no longer drives employee engagement or high performance. They are in need of something nimbler, real-time, and more individualised. Something squarely focused on fuelling performance in the future rather than assessing it in the past. The answer possibly lies in the development of a performance coaching culture.
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.