April 23, 2023
In 2015, PWC surveyed the ASX top 150 regarding performance reviews. The survey found that most high performing businesses acknowledged their performance review processes didn’t work, yet still did them in lieu of a better way. All these years later, many are still doing them and we say, it’s time to stop!
When I started reading the early research coming out of the US around 2008 (in fact PWC and other management consulting firms had started to advance this thinking much earlier), I was working in HR and it grabbed my attention. As an HR practitioner, I knew the traditional performance review framework was broken and it was welcomed news that a spotlight was being shone on the problem. It was one of the many HR practices that needed scrutiny.
Seven or so years later, PWC’s survey published some meaningful data for Australia, noting:
69% of companies saw line managers not prioritising performance management conversations or giving feedback, as an organisational issue;
line manager capability in managing performance was an issue;
46% of companies said they intended to improve their coaching and feedback as a way to improve performance management; and
while most organisations emphasised HR and senior leadership as being responsible for performance management effectiveness, 61% of employees believed they are equally responsible – that it is shared responsibility.
The research data is old now but anecdotally I am convinced these numbers would be greater now. I am also sure that the research conducted today on the degree of ineffectiveness of traditional performance reviews would be even more convincing.
In 2016 Harvard Business Review published an article; “The Performance Management Revolution”. In this article, the authors cite a senior manager from Deloitte’s People + Strategy team describing their traditional performance review process as “an investment of 1.8 million hours across the firm that didn’t fit business needs anymore”. You can read the article here.
“This research and intel has failed to drive disruption in Australia other than big US multinationals and this is disappointing.”
I too have spoken to hundreds of high performers over the years and can’t find one who has said they found the traditional performance appraisal process valuable. Nor did they consider it a key leadership tool in managing and leading their teams, in fact, the opposite was true. Many said it would undo a year’s worth of good work thanks to arbitrary goals designed to fit an ineffective template that didn’t provide a holistic process for managing the complexities of people and performance.
Another insight high performers have told me is personally is consistent with PWC’s research – they want to own and manage their own performance on their terms, based on what they need. When the objectives for performance are made clear, they don’t need an annual review process and a form (or now, a digital equivalent) to get their focus. Yet the traditional process remains. An HR driven and Manager led, templated, event based, compliance focussed process, typically conducted poorly. The research and the high performers continue to be ignored, HR refuses to let it go.
There is one distinct exception to the feedback. Many high performers stated that, the only slight benefit was that without it, they would get no feedback at all, and some feedback, even processes driven and one way, was better than nothing!
The case for change.
Back in 2015 I knew the traditional performance review processes didn’t working. Too much time, too much money, no value add. As a commercial HR practitioner, to me, it was just the definition of madness to continue, so I chucked them out and have done so ever since, but before this, I managed the compliance focussed traditional processes and I saw it all.
I recall a manager who used to photocopy both the goal document and the appraisal form and just change the names. I kind of admire the efficiency for a non-value add task! This bloke wasn’t the greatest leader, who didn’t really want to have performance conversations of any kind, but I truly believed at that time, that with the right training and the right process, one that derived value for him and his team, he would have been more willing to do it.
And these types of examples are endless:
the manager who stored up 12 months of negative feedback and just dumped it out once a year;
the CEO who demanded all his managers did them, but never did them for his managers;
the manager who used the time to talk only about him/herself and his great achievements;
the manager who used the opportunity to get feedback only about him/herself;
the manager who refused to allow people any input into why things were not achieved;
little or no desire to do interim reviews or adjust documented goals along the way;
the manager who handed out the forms, asked people to fill them out and send back all via email, no conversation at all; and
the HR department that manages the whole process via email, no training in how to have a meaningful performance converstion, how to manage performance generally, or how to do anything other than get the form back on time!
Every single one of these real life examples led to nothing other than a negative experience for all involved. As an HR practitioner responsible for driving performance, I just could not continue to support this process. There just had to be a better way. The call to change was overwhelmingly compelling and I could not ignore it.
HR must look to contemporary solutions for creating high performing cultures – failure to change is inexcusible now
For HR departments who are only interested in compliance, it will be paraded as a huge success – “we got 100% of the forms back on time” irrespective of the quality. But for HR functions that are driving and influencing culture, performance and capability, to oversee an arbitrary process is nothing other than a burden and a waste of time! Managing the follow up, begging and then threatening completion, impossible deadlines (especially if there is a link to pay), and then managing the fall out, is the exact opposite of contemporary HR. Of all these issues, and the many I haven’t covered, here is the biggest problem of all – it is all rear view – sometimes a very distant past, not the here and now or the future. Literally, what is the point?!
If performance conversations are being had on a regular basis, adjusting, realigning, resetting goals to align with constant organisational change, and providing real time quality feedback, a focus on strengths and the future, then there is no need whatsoever for one big dramatic annual event. Reviewing and managing performance is not a once a year event for any business that wants a high performing culture.
Way back in 2010, before PWC’s report, and when it was just an idea, I was brave and I chucked them out and here is the good oil – nothing changed! Noone complained, productivity didn’t drop, performance didn’t tank – that’s how little value there was – nothing changed, not good or bad. I then took all the time and money spent on the wasted traditional process and invested it into something new. A contemporary approach to managing performance, heavily biased towards leadership development and performance conversations, and it worked. People were managing and talking about performance all. the. time.
“When I chucked them out nothing changed. Performance or productivity didn’t tank, no one complained – literally nothing changed!”
To build a high performing culture, you have to manage performance. When I replaced the old with something new, something better, something that worked, a process that focussed on development, forward thinking, leveraging strengths and EQ competencies, the results were immediate. There was improved engagement and alignment and improved results. Greater clarity in the job to be done and how to get there. It built agility and resilence with the ability to pivot easily.
Since this time, I’ve constantly refined the process, applied key learnings and incorporated feedback from high performers but the results speak for themselves in all the case studies. I would never go back to traditional performance reviews. Never.
You need to do the same – your high performers will not only thank you, they will celebrate you, you will see upticks in many of your lead indicators that measure performance and you will transform from a compliance approach to the basics of building a high performance mindset and culture.
Reach out if you want to learn more about how we can help you innovate your performance management process or link remuneration without an annual event.
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