More than one-third of U.S. companies are shifting away from the once a year performance review model. In their article, Cappeli and Tavis state how from LA to New York, and in companies across the world, firms are replacing annual reviews with frequent, informal feedback conversations between managers and employees. Business researcher Josh Bersin estimates that about 70% of multinational companies are moving toward this model, even if they haven’t arrived quite yet. The main reasons more and more companies have been dropping the annual reviews? Recency bias and the surprise factor. Once a year is far too infrequent to hold performance reviews. Recency bias means we overemphasize the past 2-3 months, and forget about the rest of the year. As a result, too many employees were surprised by their reviews, having received little quality feedback prior to the annual review.

While companies may still have an annual performance review, many are implementing more frequent and regular conversations (once a quarter, a month, a week). They talk about performance and development, which make any annual reviews easier, more accurate, and less of a surprise.

3 Business Reasons to Drop Performance Reviews 

Managers and employees have admitted disliking the performance review process. HR and talent management professionals now see three business imperatives which are leading companies to abandon performance reviews.

1. The Return of People Development
Keeping good people has now become critical to organizations’ success. Companies are under competitive pressure to upgrade their talent management efforts. Replacing the annual performance system with regular feedback helps managers do a better job of coaching. It also allows employees to process and apply the advice more effectively.

2. The Need for Agility
Rapid innovation is a source of competitive advantage, which means future needs are continually changing. As more and more organizations embrace being agile, they move away from wanting employees to keep doing the same things. Workflow is becoming more flexible, and projects are becoming more short-term. It doesn’t make sense to hang on to a system that assesses and holds people accountable for past or current practices.

3. The Changing Workplace
It has been stated that by 2020, Millennials are forecast to comprise half of the American workforce, and by 2025, 75 percent of the global workforce. Ernst & Young and Accenture have already reported that Millennials make up over two thirds of their entire employee base. With the changing workplace, there is a change in how employees respond to being managed and the type of feedback they are looking for. A study stated that 80% of Gen Y said they prefer on-the-spot recognition over formal reviews, and a survey by Ernst and Young stated that 63% of Gen Z said they want to hear timely, constructive performance feedback throughout the year.

Feedback Tips

Due to this change in the performance review model, managers need to get better at face-to-face coaching. They need to learn how to regularly deliver quality feedback. Giving feedback is a major obstacle for many managers and leaders who are uncomfortable delivering negative or constructive feedback.

In our Fearless Leaders MasterClass®, we work specifically on talent development through coaching and feedback. One model our participants really like is the 60 Second Opening Statement (From Fierce Conversations, by Susan Scott) which provides a useful guide for initiating difficult conversations, such as critical feedback. One recent manager who participated in the MasterClass said:

THE 60 SECOND OPENING STATEMENT

• Name the issue
• Select the specific example that illustrates the behavior or situation you want to change
• Describe your emotions about this issue
• Clarify what is at stake
• Identify your contribution to the problem
• Indicate your wish to resolve the issue
• Invite your partner to respond

Use this opening statement guide for a “quick win” that you can immediately implement to help initiate feedback conversations. It’s time to say hello to feedback! 

Want more quick wins? Check out our management development training. Need a break and a long-term plan to improve your systems? We’ve got you covered! 

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