How to Make the Most of Performance Reviews?

This article was originally published on LinkedIn. 

Performance reviews. Love them? Hate them? If you’re like most, you fall in the latter camp. Many view formal performance reviews as a dreaded experience and a waste of time. They can cause anxiety for both the direct report and manager. But are they a necessary evil?

In one of my MBA courses, we recently read “Get Rid of the Performance Review!” by Samuel Culbert. Culbert argues that performance reviews are “negative to corporate performance, an obstacle to straight-talk relationships, and a prime cause of low morale at work.”

One technology company estimated spending $21 million per year to execute the performance review process. After surveying employees, this company found that 54% of direct reports thought the performance rating they received was accurate. Even worse, 53% of leaders believed that their direct report’s final rating actually reflected their performance.

So, direct reports are more confident in their review than the managers actually delivering the review?

Something is obviously wrong, but what should be done? A recent trend, at least for technology companies, is to eliminate performance reviews altogether. Our class had a guest speaker from Dell who shared how they came to this conclusion.

A few members of the HR team conducted an external and internal study to analyze the effectiveness of performance reviews. The team came back with several bold questions. Are performance reviews necessary, and if not, should we get rid of them? The data showed that performance reviews were causing more harm than good.

In time, the results were shared with CEO Michael Dell. He loved the idea and immediately reached out to employees: “We’re thinking about getting rid of performance reviews. What do you think?” Hundreds of people responded and almost unanimously said, “Yes! Please eliminate them!” Dell no longer does formal performance reviews. Instead, managers are required to have quarterly discussions with their direct reports. These discussions focus on performance and career development.

Dell isn’t alone. Adobe eliminated performance reviews a few years ago. In 2013, Microsoft ended its infamous stack ranking process. Several of my classmates shared that PwC recently ended performance reviews. More companies will likely follow.

While traditional performance management has its flaws, I’m not sure that all companies should end the review process. Employees need to receive feedback, especially feedback that is immediate, frequent, direct and specific. These discussions should be taking place regardless of how the company conducts performance reviews.

The onus of providing feedback falls on the managers, but direct reports are wise to initiate performance discussions. I once had a manager who asked for feedback in almost every one-on-one meeting with his manager. This may sound excessive, but it showed he was committed to improvement. When we approach our managers with an attitude of humility and a desire to grow, we’ll likely receive the guidance we need.

While these are a few steps to maximize performance discussions, I don’t have a sweeping cure-all for the performance review. I’m not convinced (yet) that eliminating formal reviews solves the problem, but we can certainly improve the process within most organizations.

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