Why some firms are swapping a traditional annual review for continuous and/or peer-based performance evaluations.
Employee performance reviews are the time-honored method for evaluating employee performance and pay, but many companies are doing away with the concept as we know it. Are they brilliantly progressive or setting themselves up for disaster? Read on to find out who’s doing it and why.
It started with big companies like IBM, Dell, and Microsoft making the switch. Now everyone from Deloitte to Gap is doing it. If your company currently uses the standard model of yearly manager-led performance reviews, you probably understand firsthand many of the reasons they can cause headaches in a lot of different areas, but there are also likely reasons you haven’t considered.
One of the biggest arguments against annual performance evaluations is that they take a considerable amount of time. In larger companies, managers find themselves spending one or two weeks per year addressing the review process.
Employee performance reviews are generally supposed to be thought of as positive. The employee does a good job, gets a raise, and goes on to do more great things… but that’s not what happens in real life most of the time. Instead, managers treat them as another task to get off their plates, which changes the mindset they’re conducted with. The employee is no longer the center of attention, but rather, is devalued because of the haste.
Most companies tie raises to the reviews, but, in reality, it’s often HR and/or the economy that dictates how much of a raise is given. In other words, if the employee is amazing, he may not get a raise that corresponds with his performance if the economy is bad or there’s a predetermined allowance for raises. This sends the message to the employee that he may not be rewarded for good performance, and it can kill morale.
Many companies have a third party or HR conduct reviews. Not knowing the employees, it’s difficult to make an assessment. In companies where managers do the reviews, staffing changes make it hard to track an entire year.
While traditional performance reviews can be problematic, employees still need feedback on how they’re doing. It’s an essential component to keeping them motivated and the company moving forward. The answer, many think, is to replace the traditional model with one of two alternatives.
One emerging model is referred to as continuous performance management. Rather than having an annual review, employees meet with their managers during select intervals throughout the year. This give both a chance to address things while they’re fresh and employees to change things up if they’re underperforming. Occasionally, companies do this and offer on-the-spot bonuses for performance.
With the peer-based model, employees are asked to provide anonymous feedback about their coworkers. The aim to this is to get unbiased feedback, a broad scope of information, and to recognize employees for things that management might not otherwise note.
The right model will vary by company and management style. If you’d like help exploring your review options, contact us today.
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