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The Absurdity of the Annual Performance Review

By: Gal Rimon, Founder & CEO, Centrical

I recently had a conversation with the leader of an e-commerce company. She spoke with energy and passion about how able her organization is at identifying a great prospect or easily cross-sell a customer, literally as that person is in the process of buying something else, or make a loyal consumer hold an even stronger allegiance.

She went on a bit more on the virtues of blending data sources to learn more and do better…all in real-time. Then a slight frown creased across her mouth followed by an exhale hinting at frustration.  “How can I understand, manage and improve the performance of my employees with the same agility and effectiveness we’ve been able to achieve in other parts of the business?”

Good question, and, unfortunately, one that’s being asked by more and more executives. A very real reason that’s the case is too few have embraced the counsel of the brilliant entrepreneur Richard Branson, the man behind a plethora of companies all named Virgin. Simply put, he advises companies to put employees first, customers second. 

Think about it. Sophisticated data gathering, organizing and analyzing software that is used to do all that my e-commerce CEO friend described and more can be found in just about every enterprise, regardless of industry sector. 

Curiously, the same cannot be said about tools and techniques used to improve employee performance management, engagement and coaching in ways that hold some similarity to those handling customer-facing processes. 

Case in point: the annual performance review, a relic of another business era that just can’t seem to die, let alone die quickly. No less than the Society for Human Resource Management notes that 95 percent of employees are dissatisfied with their companies’ appraisal process. Yet it continues as if all’s just fine.  Further, the Workspace unit of Gallup finds that these reviews do nothing to motivate employees to do better. It also notes “the purpose of performance management is to improve quality of work, productivity and other business outcomes, but traditional approaches have consistently fallen short.”

Not only are the methods wanting, so too are the relevance or applicability of the findings drawn from such periodic assessments. While some organizations have moved from annual to quarterly reviews, a manager is still likely addressing long-forgotten work issues. The employee doesn’t get it. The manager is ill-equipped to offer meaningful, actionable coaching. No one benefits. And the top and bottom lines suffer.

Research and advisory firm Gartner reports “many organizations are reinventing their performance management processes by either de-emphasizing or eliminating annual performance reviews and introducing more frequent check-ins. These changes are being made with the goal of improving employee engagement, productivity and retention. The trending belief is that traditional performance management focuses on the past and that reviews occur too infrequently to effectively course-correct performance or engagement issues. Employees are actually demotivated by a performance process that seems to be disconnected from their ongoing efforts.”

 If businesses are to embrace a software-powered method of assessing and managing employee performance and development in a way akin to evaluating the demands and desires of their customers as well as realize consequential benefits, they must consider the following:

  • Evaluating different elements of an employee with different tools yields an inaccurate picture, impacted by the biases of each mechanism;
  • Looking at the individual holistically, collecting, synergizing their relevant data offers a more complete, more accurate view;
  • Knowing how an employee is doing at-that-moment, in real-time, changes a manager’s discussion from a review of the past to a coaching session for tomorrow; and, 
  • In this age of Fitbit, evidence is growing that today’s employee, especially Millennials and Gen Z, is their own best motivator. When they can see what they need to do, and how they’re doing it, they, on their own, step up to the challenge.

Gartner observes companies have emerged that provide various combinations of capabilities and tools. Importantly, they can be tailored to serve the best needs of the organization as opposed to conforming to an industry standard. This is of particular value given how even the world’s largest enterprises point to unique cultures, where “fit” is so crucial. The firm adds, “most platforms include manager coaching tools, social feedback and goal/objective management at a minimum. They may also include any combination of rewards and recognition, pulse-survey tools, gamification, manager advice, wellness and volunteer program management, or other tools.”

If you wonder whether such a platform can serve your business, consider the company I lead, Gameffective. Working with companies like Microsoft, Novartis, Synchrony, and Unilever, among others, our employee performance management, engagement and learning platform has produced improvements like +12% employee productivity, +50% upsells, +30% faster onboarding, +12% customer satisfaction, and a 10% reduction in employee attrition.

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