The Verdict is in

Performance reviews are out.
What will replace them?

Traditional performance management — the annual exercise of a manager reviewing the contributions of his or her employees and then sitting down with each for a taxing conversation — is dead. R.I.P.

Last week, the Wall Street Journal reported on GE’s recent move to ditch the traditional performance review system. They are not alone: in just the last two years, dozens of large companies have announced that they are abandoning their existing performance management systems (AccentureDeloitteAdobe, to name just a few). This movement has generated substantial buzz around the topic of the dreaded annual review.

Most likely, none of this surprises you. More than 60% of companies that employ traditional performance management systems find them to be highly ineffective. If you work for any organization that conducts a performance review (and upwards of 97% of American companies do), you are probably familiar with the frustrations of the process. It is time-intensive, stressful, and feels unfair. It is infrequent, such that feedback is stale by the time you receive it. It fails to achieve its objective of improving employee performance, and often undermines the teamwork-orientation most companies advocate every other day of the year besides Feedback Day.

Few business practices are as universally abhorred as the annual performance review, yet the absence of a viable replacement has plagued many organizations looking for something else. They know that at the very least they need a way to help employees assess their contributions, identify which skills they need to improve on or acquire, and feel motivated to develop into higher performers. Companies cling to the old model because there isn’t really an alternative out there that does the same thing better.

New ‘progressive’ performance management systems correct some of the pitfalls of traditional reviews. Companies purchase expensive software that automates the feedback-collection process and prepares the reports, so as to decrease the time-intensiveness of the process and increase standardization of output. They replace one-off documents with slick but often unwieldy systems, pile on additional categories of data, gather yet more responses — essentially attempting to solve the problem with volume and velocity.

Though well-intentioned, these measures only address the negative externalities associates with performance management, not the glaring issue with the traditional review system: even when done right, it doesn’t work. And by “work”, we mean getting the right information to the right people and teams at the right time. Organizations are made up of teams whose actions and results are highly dependent on one another. The perfect performance management system would show how each team and individual is responding to and anticipating challenges in their environment, and would provide actionable feedback allowing managers and employees to modify their behavior in real time — not three, six, or twelve months after the fact. An individually focused, backward-looking process based on pre-defined goals simply does not drive performance in a dynamic, interconnected world. Performance management at the individual, team, and company level should be part of daily work, not divorced from it.

The solution to the outdated performance management problem is not just a different performance management system; it is something new entirely. It is a mechanism for tracking the entire body of work that an employee, team, and organization has completed or contributed to within any time frame. It ties the efforts to metrics when appropriate, and provides qualitative context where numbers miss the story. It shows how each employee’s contributions affected team and organization results, and how individuals supported each other in their development. It provides rich context, such as what external factors might affect results on particular initiatives. And it facilitates an ongoing conversation between employee, manager, team, and teams.

This solution informs not only the career progression-related decisions that traditional performance management is often used (or rather, misused) for, but also gives employees visibility into how their efforts affect the rest of the business. By communicating progress in real time and enabling leaders to direct their efforts to the teams and individuals who need it the most, this system allows for constant performance improvement.

We call this solution CrossLead. The performance management problem is not with the technological application used to complete the employee reviews, the managers filling out the forms, or the questions used on the appraisal itself. It doesn’t take a public overhaul of an appraisal process at a corporate giant, or a survey saying a vast majority of workers dislike their company’s review process, for executives and employees alike to realize that performance appraisal systems are broken. The systems are designed for bad managers, who require a forcing-function to have development conversations with those they manage.

For good managers, the annual review is redundant. Effective leaders are already having performance conversations with their employees throughout the year — conversations about individual skills, team dynamics, communication across teams, development opportunities, overcoming roadblocks, learning from failure… open conversations supported by real information about real performance in real time. CrossLead provides them with the tools necessary to contextualize the work of their teams and team members, and to drive and evaluate results on an ongoing basis.

So goodbye, traditional performance management. Can’t say we’ll miss you!

by Jess Reif & Bernadette Doerr