There’s been a flurry of news over the summer about some big corporations abandoning the traditional annual Performance Review (PR), joining others who’ve made the same decision over the past several years. Microsoft, Adobe, Medtronic, and most recently Deloitte and Accenture, have all jettisoned the traditional annual PR and its accompanying forced ranking requirement, up or out process, and other common components. About 6% of the Fortune 500 have made this move.

A variety of research and studies show that the process does not reliably improve employee performance (presumably the goal), and the costs are very high in dollars and morale, as the process often drives resentment and bad feelings in both managers and employees. According to the management research group, the Corporate Executive Board (CEB), 95 percent of managers are dissatisfied with their performance measurement systems, and 90 percent of HR department heads believe they do not yield accurate information.

None of this surprises me. Anecdotally, I’ve known what all these studies have shown because like most of you, I’ve been on the receiving and giving sides of annual reviews, and disliked both of them. As a senior business executive and manager of people, I used to have one of those systems but I replaced it several years ago. It’s interesting to see others coming to the same conclusion and to understand some of the reasons why these more complex systems don’t deliver the best results.

If you have the time to read the full article about some of the latest brain research, and what it shows, it’s very interesting, but in short, even employees who get positive news can suffer negative feelings; the process often triggers disengagement and inhibits creativity and growth. Studies show this is because “labeling people with any form of numerical rating or ranking automatically generates an overwhelming “fight or flight” response that impairs good judgment. This neural response is the same type of “brain hijack” that occurs when there is an imminent physical threat like a confrontation with a wild animal. It primes people for rapid reaction and aggressive movement [and] is ill-suited for the kind of thoughtful, reflective conversation that allows people to learn from a performance review.”

We have a system now that is akin to Adobe’s Check In. Once a year our employees evaluate their accomplishments, think about what they want to do for the next year, and what training or assistance they need, and then set goals. Throughout the year, everyone keeps in touch and talks on a periodic basis about how both long and short term projects are going. We do this in real-time to both teach and guide, as well as to provide feedback and constructive comments for improvement as needed. And that’s it. Everything repeats each year. For me, this type of system is just an example of putting our values into action.

Respect for the Individual.

It’s one of three core values that underpin what we do at ATR. Everyone wants, and deserves, to be treated with respect and courtesy. It seems to me that the PR process too often is inherently disrespectful. Think about it – ranking people, literally turning them into a number, how can that be respectful?

I value my employees as people. I am not here to look over their shoulder constantly or second guess and judge them once a year. To me traditional PRs always felt like “gotcha” moments, again, the epitome of disrespect. Respectful to me is approaching it this way. We’re both adults, let’s act like adults. You’ve been hired to do a job. Let’s figure out what that entails, what your responsibilities will be, what specific projects and day to day activities are involved, and how you’re going to accomplish all of that in a meaningful way.

As the time progresses let’s have honest two-way conversations where you are encouraged to identify issues, ask questions, suggest solutions or simply ask for help. In turn your manager can provide guidance and instruction on a real time basis. Simple, straightforward, and much better for everyone involved. It’s also smarter for business. If you aren’t doing your job well and need guidance or training, providing it retroactively once a year isn’t going to cut it. Periodic check-ins and continuous feedback help ensure that both projects and the individual stay on track.

As a business executive, I know that each company needs to make the decision that works best for them. I also know that we are always looking for information on best practices and hoping to learn from other successful companies. So it’s interesting to see some of the most successful business organizations making choices similar to the one we made at ATR. Mostly though I’m glad to reaffirm my commitment to a more respectful, and it turns out more effective, performance management process.

Jerry Brenholz
President & CEO
ATR International, Inc.

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