"Study finds that basically every single person hates performance reviews," reads one headline from The Washington Post.
A company with 10,000 employees spends $2.4 million to $35 million per year on performance reviews. In an ideal world, all that investment and effort should bring a significant performance improvement. But, in the real world, it's a missed opportunity. Employees hate reviews. Gallup says that "only 14% of employees strongly agree that the performance reviews they receive inspire them to improve." Managers view them as ineffective. According to a CEB survey, managers believe that traditional reviews improve employee performance by only 3 to 5 percent.
The traditional performance review systems need to evolve. More organizations are getting flat, and the work more short-term and project-based. This change requires prioritizing employee development over incentive-based appraisals. Companies know this. Big names such as Accenture, Gap, GE, Microsoft, Google, and Medtronic have ditched performance reviews and shifted to continuous feedback. One study estimates 70% of US companies are already following their lead.
You may not want to shift to these new models yet, but you will need to update one critical aspect of your performance management system: employee feedback. We're in the middle of a pandemic, and it has changed the way we work. It's become more digital, the workday more flexible, and teams more distributed. Although organizations were already moving in that direction, COVID-19 accelerated the shift. This new reality requires updating your feedback and review systems. The feedback needs to become more frequent, best served by a 1:1, continuous approach. The reviews need to use multisource data, best obtained from 360° reviews.
Use manager 1:1s & continuous peer feedback
Continuous feedback is the backbone of modern, agile organizations. It creates a culture of ongoing and honest feedback conversations between managers and employees, and among peers. These conversations include coaching, praise, and what an employee needs to do differently. Here's why multinational companies have switched to this approach.
- Real-time coaching: It helps employees set and meet their goals. A Deloitte report estimates a 21% boost in business results when leaders embrace a culture of coaching.
- Employee development: With continuous feedback, you can go beyond accountability to help develop your employees' personal and professional growth.
- Increased engagement: Continual recognition and coaching make employees feel more involved and engaged at the job.
- Better relationships: Peer 1:1s are a great way to build better relationships among employees and managers. The informal nature of these conversations brings authenticity, creates trust, and deepens work relationships.
One caveat. More feedback is better, but too much feedback can create information overload and reduce employee productivity. Keep it short yet helpful.
Deploy 360°s for unbiased assessments
For periodic evaluations focusing on employee's overall performance, you need more than 1:1 feedback from managers. Research shows that "giving constructive feedback is at the bottom of the competency list for managers and executives."
360° feedback gives you an employee's complete picture with inputs from peers, superiors, reports, and even outsiders. Here's why it's better than managerial reviews.
- Fair feedback, not judgments: Only 29% of employees believe that reviews they receive are fair. Because 360° feedbacks pool data from many sources, it's as fair as it gets.
- Less noise and biases: When many people assess a single subject, it cancels out the noise and biases from the data, making the overall review better.
- Context for a complete picture: It gives the "whys" of employee performance with a better idea of their strengths and blind spots.
- Focus on behavior: Ratings tell you the outcome of past behavior. 360° feedback lets you focus on the root cause: employee behavior. It helps you figure out where you need to nudge.
- Early conflict resolution: When you see two employees are too critical of each other, you can get them on a Zoom call together to sort out the issues before any crisis.
Watch out for very detailed 360° surveys, too much managerial oversight, and half-hearted buy-in by managers. These can reduce the quality of the data that 360° reviews generate and their overall impact.
Link feedback to business goals
Help your employees see the reviews and feedback from your company's perspective: How they help to achieve the organization's goals. It will reduce aversion to negative feedback and give them a sense of purpose—a powerful motivator. When employees see that they are a part of a team working together towards a shared goal, they become more committed and deliver high performance.
"As a manager, you owe candor to your people," Jack Welch, the superstar former CEO of GE, said in a WSJ article. The feedback inside your organization should be truthful, honest, and fearless—whether positive or negative. One of the best ways to promote candor culture is by setting an example. Start with yourself.
Business is evolving faster than in the past, and business processes need to adapt at the same pace. Performance reviews are one of the least popular aspects of modern business. It doesn't need to be that way. By bringing together the best of both worlds: continuous feedback and performance reviews, you can reinvent your performance management for today's times.
A modern performance management tool like Mesh helps your teams drive performance and employee development with real-time 1:1s and social recognition. Book a free demo today.