Performance management practices are evolving rapidly and the practice of annual performance reviews is under the gun, especially as it is tied to compensation and rewards. Last week I attended a conference at the University of Akron titled “Do Performance Reviews have a Future?”. The conference was presented by The Leadership & Human Resource Management Advisory Board. This was my first time at their conference and I was impressed. The speaker lineup included professors, attorneys, consultants and HR leaders. The speakers explored various aspects of why annual performance reviews as we have historically known them are ineffective (often counterproductive), as well as alternatives to improving the process.
Many of the findings presented reinforced concepts now familiar in HR circles. For example, Adam Ross of Goodyear discussed how Goodyear is becoming more strategic and how important it is to connect that strategy to employees. Mary Vales of Hyland Software said their culture is connected to the vision, mission and values of the company, and Hyland’s commitment to their people has helped the company move up various lists of great places to work and also driven financial results.
Mary then used a short clip in her presentation that depicted a fictional employee receiving praise and positive feedback from her boss, coworkers, family and friends in a Video Review. The video evoked a powerful and positive emotional response from the employee. It was a unique approach, and one that any employee would treasure.
Alan Colquitt from Eli Lilly took another approach, talking about the science behind performance appraisals. More to the point, he talked about the lack of factual data supporting the premises of traditional appraisal processes. For example, the idea that people are motivated to perform better with pay incentives has proven false. Instead, he said, people are motivated by goals, meaning and making progress. Alan pointed out that 95% of managers are unhappy with their company’s performance management systems. If managers are that unhappy, imagine how their people feel.
Yes, the annual performance review practice took a proverbial beating that day. However, even though many companies have abandoned the practice, most have not. Or at least not completely. The challenge is to find something that is better and more effective, and then to implement in a positive manner. This can be especially daunting in global organizations. Joseph Lubin from PRADCO gave several examples of clients that were in process with changes, and the successes and ongoing challenges they face. Madhavi Rubbo from GE discussed the challenges of changing a strong company culture on this topic, as well as rolling out a new process in waves around the world. Most examples of alternatives to the annual performance review were described as works in progress with results to be determined.
Ultimately, I am not sure we answered the conferences question about whether performance reviews have a future, but I concluded that in its traditional form, at best, the performance review is on life support.
During the Q&A session, I asked the group of speakers about the origins of the movement away from the annual review – is it rooted in managements desire to improve the bottom line, or in dissatisfaction of employees? Based on their responses, it appears this change is being driven by unhappy employees. Given the growing shift in supply and demand of talent (at least growing demand), the response was not surprising. Even so, my observation is that improving the way we evaluate and recognize people does lead to greater engagement and satisfaction, and that will lead to greater profitability.
Thanks to the University of Akron, the Advisory Board, the sponsors and, especially, the speakers for a great conference!
For help developing and implementing performance review and other talent practices that contribute to greatness, please contact me. We are happy to help.