Rethinking the Annual Performance Appraisal

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For decades, the annual performance appraisal has been a staple of any human capital management or talent management approach. However, considering the accelerating pace of change in business today, some organizations are questioning whether the annual review is still the best way of evaluating staff performance. And many (Deloitte, Gap and Accenture, to name a few) have already moved in a different direction altogether.

Today, employees are looking for opportunities to provide and receive more immediate feedback, and managers are looking for fairer methods for evaluating performance, assessing training, mapping career paths, deciding on promotions, and incentivizing with increases and bonuses. But if the annual performance review is to fade away, what will take its place?

1. Looking Forwards, Rather Than Backwards

Performance measurement should never be the end goal. Instead, it should be seen as a way of understanding an individual’s aptitudes and areas of potential weakness – and then assigning them to tasks commensurate with their skills, training them in their new positions, and giving them the space to grow. Try shifting the focus away from “what has the individual delivered?” to “what is the individual capable of?”

2. Regular Feedback

Try developing a culture where managers weave a process of continual assessment into their ways of working. By giving staff regular, informal feedback, they are able to make the required changes in real-time. This is obviously a far cry from the annual appraisal, where staff may only learn about any failings up to 12 months later. And the approach of an ongoing dialogue goes both ways– encourage and enable employees to share feedback with management throughout the year. 

3. Empower Individuals Through Self-Assessment

By giving employees the opportunity to become more actively involved in the performance appraisal process, they will feel a greater sense of ownership and accountability. While manager assessment and peer assessment are still vital sources, companies often fail to involve the individual in defining their value and developing plans to enhance that value.

4. Use Digital Tools to Increase Clarity and Transparency

New digital tools — peer recognition software, performance management platforms, etc. — are available to organizations that are looking to re-imagine their approach to performance management. These can help to ensure individual objectives remain visible, increase transparency in the review process, enhance collaboration, and encourage participation.

5. Integrate Performance Management With Other Systems

By linking performance management tools with other enterprise systems – such as ERP, accounting, time management, Intranets, and other workflow systems – the performance process becomes embedded into one’s daily activities. By contrast, annual performance appraisals and 360-degree feedback tend to take place in isolation from one’s actual working environment – a layer of abstraction which can make evaluation difficult.

Evaluating the contribution of knowledge workers will always be a somewhat subjective process. But by evolving the approach, it is possible to evaluate and optimize each individual’s efforts in pursuit of the organizations goals. As we mentioned in an earlier post, acknowledge weaknesses, but invest in strengths.

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