Traditionally, performance management has always run along the lines of—waiting until the end of the year, conducting a review, determining compensation, and repeating. But how effective has this been in your long-term strategy? How has it helped your employees grow into loyal high performers that strive to support your cause?

According to a Deloitte survey, only 8 percent of companies report that their performance management process drives high levels of value, whereas 58 percent said it is not an effective use of time. And the problem is simple—we’re always caught up in the past—tracking past goals, evaluating past performance, and ranking employees based on past achievements.

But what about the future?

Why are we merely looking at stories of the past when we could be building our own narrative for the future? What if, instead of merely tracking past performance stats as we typically do in performance evaluations, we expanded the process into a more well-rounded system of performance enablement that fuels future performance?

Traditional performance management is outdated and ineffective

The traditional performance management system is a classic example of how an outdated practice can stick around for years despite proving to be ineffective time and time again. This system that we’re so familiar with involves setting performance targets for employees and then evaluating their performance against those targets at the end of a set period—often annually.

But is this really an effective system of performance management?

Firstly, such a system can lead to a focus on short-term goals at the expense of long-term objectives. Employees may prioritize achieving their targets for the current period over pursuing strategic objectives that would benefit the organization in the long run.

Secondly, employees may feel that they are being evaluated solely on their ability to meet predetermined targets rather than on their overall contribution to the organization. The traditional system can also be time-consuming and resource-intensive, as managers and employees must devote significant amounts of time and effort to setting targets, monitoring progress, and conducting evaluations.

And finally, by focusing solely on what employees have done in the past, conventional performance management systems fail to consider their potential for growth and development in the future. This means that employees who may have the potential to become high performers may not get the recognition and support they need to reach their full potential.

Performance management needs to be reinvented

As we move forward in the ever-changing landscape of people management, it's becoming clear that focusing on past performance and rigid goal-setting has led to demotivated employees and missed opportunities for growth and development. A backward-looking performance management system is a mere rearview mirror, and rear-view mirrors are useless when you can't see what lies ahead.

But what if there was a better way?

What if you had headlights on your car, illuminating the path ahead and giving you the guidance and support you need to move forward? What if we could shift our focus from past performance evaluation to future performance preparation?

At the end of the day, what creates a better business impact—evaluating employee performance of the past year or building on it to facilitate stellar performance in the coming year?

It's time to ask yourself: Are you ready to carry learnings from the past and embrace a forward-focused approach to performance management? A system that not only helps you reach your goals but also supports your growth and development? The choice is yours.

From performance reviews to performance enablement

To keep up with the unprecedented and continuous changes to the global work environment, organizations must adopt a dynamic and agile approach to managing employee performance. HR leaders must prioritize performance enablement—a forward-thinking strategy that empowers employees to continuously learn, grow, and evolve in their roles. 

Such a system involves less emphasis on annual performance reviews and more emphasis on a continuous feedback system with regular check-ins and less ‘ratings’. According to business researcher Josh Bersin, 70% of multinational companies are moving toward this model.

So how do these companies go about this shift? Here are some lucrative examples from Adobe, Deloitte, and Accenture:

How Adobe reduced voluntary turnover by 30% with regular check-ins

Adobe was ahead of the curve when they recognized that their performance management system was archaic and ineffective. In 2012, they replaced annual appraisals with regular check-ins and frequent feedback, allowing different parts of the organization to determine how often they should hold these conversations based on their work cycles. 

This resulted in a marked increase in employee engagement, with voluntary turnover decreasing by an impressive 30%. Abolishing forced ranking and assessing employees based on how well they meet their goals helped Adobe save a staggering 80,000 management hours per year and transformed the way employees are evaluated and supported, leading to a more productive and engaged workforce.

Deloitte saved 2 mil­lion work­ing hours per year by scrapping once-a-year performance reviews

Deloitte, one of the world's largest professional services firms, realized that their traditional annual performance reviews and feedback processes were consuming an astonishing two million working hours per year across their organization. To address this issue, Deloitte implemented a new performance management process that requires team leaders to check in with each team member once a week to discuss near-term goals, provide coaching, and comment on recent work. These check-ins are initiated by the team members themselves, giving them a sense of ownership over their work and time. 

This new system has led to a significant increase in employee engagement and satisfaction while saving Deloitte millions of working hours each year. Rather than relying on traditional performance ratings, Deloitte's quarterly reviews ask team leaders to respond to four future-focused statements about each team member, empowering employees and creating a culture of continuous improvement in the process.

Why Accenture did away with annual ratings

Accenture decided to eliminate its annual performance reviews and ranking system in September 2015. Instead, they put frequent feedback and conversations at the heart of their new process, focusing on performance development rather than performance rating.

Accenture believed that the traditional annual performance review process was often time-consuming, demotivating, and provided limited value to employees. The new system encourages regular feedback and coaching conversations between managers and employees, allowing employees to receive real-time feedback and take immediate actions to improve their performance.

"Rather than taking a retrospective view, our people will engage in future-focused conversations about their aspirations, leading to actions to help them grow and progress their careers."
— Ellyn Shook, Accenture's Chief HR Officer

Decoupling compensation from performance reviews

Performance reviews are not just about determining compensation; they are about fulfilling employees' aspirations and investing in their professional growth. When you incentivize employees only with money, their motivation becomes limited to earning more money. Now, nobody’s saying that money is bad. But in such a singular approach, neither the employee nor the organization benefits in the long term.

What if, instead of using compensation as the sole motivator, we tied performance management to employee growth and development as well? Employees who feel invested in and valued at work are more engaged, productive, and loyal to their organizations. So why do so many companies still cling to the old-fashioned practice of tying compensation to performance reviews?

When you invest in an individual’s professional growth by providing good mentorship, coaching, and other resources, they are empowered to perform better on their own. The focus then shifts to the long-term growth and development of employees, not just on short-term financial gains, creating a self-motivated, highly engaged, and thriving workforce that is driven to achieve its goals.

Bid farewell to forced rankings

It's time for a new approach to performance management, one that focuses on employee development and creating a positive work culture. Performance management approaches where employees are forced to compete against one another in ranking systems for higher compensation are gravely outdated. 

A new approach that emphasizes employee development and fosters a positive work environment is the need of the hour. Investing in professional growth through one-on-ones, coaching, and mentorship creates a highly engaged workforce that drives exceptional organizational performance. It’s high time we bid farewell to forced rankings and welcome an era of performance management that prioritizes employee satisfaction and development.