As of September this year, multinational management consulting firm Accenture scrapped its annual performance evaluation process as part of a massive revolution in internal operations. With some 330 000 employees across the globe, changing the way the company reviews employee performance is considered an epic move.
Accenture joins a growing list of major corporations in saying goodbye to the traditional performance review, or annual ratings process – a rite of corporate life that employees and managers all love to hate. Here’s why it – and others such as Adobe, Gap and General Electric – has made the shift towards more fluid performance evaluations.
When it comes to traditional performance reviews, there’s usually a long list of complaints from everyone involved. It’s a cumbersome process that wastes time and money, often tying up the human resources department in a nightmare of paper processing. Add on the fact that over the past decade the average manager or supervisor’s responsibilities have almost doubled, leaving little (if not no) time available to spend on making the exercise meaningful and valuable for all concerned.
And if you take into account the likelihood that performance goals set at the beginning of the year are usually obsolete by the end of it, one begins to question whether a single (and often tense) conversation over an annual cycle serves to promote positive performance growth.
The age of instant feedback
If you consider the digital world we live in, we’ve become accustomed to instant feedback – whether it’s a friend liking a post on Instagram, or a comment shared on Facebook and other platforms. We want to know, regularly and consistently, how we’re doing, how we’re progressing and if we’re on the right track. Nobody wants to wait a year to get that feedback.
It’s this conflict between the readily available feedback we are accustomed to in our daily lives and the tedious annual performance review cycle that places the traditional ratings process out of step with the modern workforce, especially among the younger generation.
More meaningful conversations
By replacing the annual review process with more frequent and consistent conversations, Accenture, Gap and other companies undergoing this transition hope to create more valuable – and measurable – feedback between managers and their teams, which will hopefully incentivise their workforce to achieve greater goals.
Interestingly, General Electric has joined the fray too. Its move in this direction is considered a global nod towards a more fluid style of assessing employee performance. Given the company’s history, it’s also something of a corporate acknowledgement that the traditional forced ratings process – championed aggressively by then chief executive Jack Welch in the 1980s and 1990s – is off-key with the today’s plugged-in workforce.
Welch’s system required supervisors to assign a certain percentage of employees to high, medium and low rankings, and then brutally to cut the lowest ones. Despite this process being mired in pitfalls such as bias, when General Electric initiated the forced rankings, at the time many companies rushed to follow Welch’s lead.
The maverick approach
Now, a new rush is in play, with nearly 10% of Fortune 500 companies doing away with annual ratings. As reported in the Washington Post, the Institute of Corporate Productivity – a research network that studies management practices – predicts that this number is likely to grow. Experts say that this shift is being driven by several factors. For one, the amount of data available to companies today that can chart and monitor employee performance in real-time, allows for more immediate feedback.
The concept is not a new one. In 1988, Ricardo Semler, chairman of Semco, one of Brazil’s largest conglomerates, published the bestseller Maverick. The book is essentially his autobiography, but it details his unusual management style and labour relations policies. Starting out as a manufacturing company, Semco allowed its workers to set their own production quotas. What Semler found was that employees would voluntarily work overtime to meet the goals they had set for themselves. Semler also introduced profit-sharing right down to the factory floor level, in lieu of providing incentive bonuses for only employees in senior management positions.
With technology driving the transition towards this new trend, performance management systems are being streamlined – but, at the same time, gathering even more information than before. Besides the obvious benefit of preventing the end-of-the-year paper tangle, this means that supervisors will no longer need to recall a full year’s worth of performance accomplishments or setbacks in preparation for an annual summary meeting. It also means that employees, by receiving consistent feedback, will feel more in control of their careers, and be empowered to meet their potential.
In addition, specially designed apps will allow companies such as Accenture to more easily track performance-related conversations between employees and their reporting supervisors. Technology like this will even identify trouble areas, essentially removing the pitfall of human bias. This will not only give employers the chance to set up employee growth and development programmes effectively, but will provide them with a stronger legal leg to stand on when it comes to personnel decisions such as approving raises or firing staff, because all the relevant data is on record, and – more importantly – up to date.
Employee performance, in review
At the end of the day, having a productive workforce is what needs to take centre stage for any company. While traditional performance evaluations might have been initiated with the goal in mind towards improving employee productivity, those in the know believe that these forced ratings are doing more harm than good in the current corporate climate.
Accenture’s move away from the annual review process was in the works for over a year, following the firm seeking feedback from its workforce about what changes it could make to boost employee productivity. While General Electric has publicly stated that it will still include an annual summary meeting during the transition phase, the company’s new performance review programme has been designed to allow these yearly conversations to happen more fluidly.
It’s important to remember that your employees are human capital. Actively and consistently investing in your employees, using measurable and meaningful performance feedback, means that your company as a whole will start to see a return on its investment.
Relegated to maverick status almost three decades ago, Semler was surely onto something when he empowered his employees to set their own goals.
Despite what Jack Welch managed to achieve with the forced ratings process at General Electric in the 1990s, corporations that followed his lead haven’t necessarily saved time or money by consigning performance feedback to an annual cycle.
Given the increasing workload, the average manager spends 210 hours a year on performance review-related activities, including filling out forms and giving evaluations. Deloitte, which has said it will be transforming its performance evaluation system soon, says the company was spending up to 2 million man-hours per year on performance reviews.