A growing trend among large companies is likely to bring about a huge sigh of relief from employees and managers – getting rid of the dreaded annual performance reviews.
Accenture, a business management company made up of about 330,000 employees, announced this week that as of September, annual performance reviews would be disbanded. The company plans to implement a more fluid system that would allow for immediate employee feedback on an ongoing basis.
The firm is joining a small but influential number of companies that no longer rely on performance reviews. Expedia, Adobe Systems, Gap, Microsoft, Deloitte, and Medtronic are other notable companies that have revamped how they give employees feedback and how they evaluate their work.
Cliff Stevenson, senior research analyst at the Institute for Corporate Productivity, estimates that about 10 percent of companies no longer require annual reviews, up 6 percent in two years. “Still not overwhelming numbers, because I think these things take time and a lot of companies typically like to do a ‘wait and see’ approach and see how other companies do,” Stevenson says.
Stevenson warns that companies that terminate the process need to make a cultural shift of how performance is evaluted, rather than just getting rid of the process. “You can get rid of the rating system and still have the same results if you don’t change the entire idea of letting the employees be part of their own career development and their own performance discussions,” says Stevenson.
Adobe is one example of a company that had difficulty convincing its employees that eliminating reviews wasn’t just an HR gimmick. Early on, employees were suspicious and assumed a similar process would just replace the old one. However, the employees realized over time that the new tactics taken to judge their performance, such as customer satisfaction and time spent on a particular task, were actually fair ways to measure their work.
Ironically, Adobe realized that the new system took up a considerable increase in time. Managers spent about an hour per week discussing employee performance, rather than just eight to ten hours per year as in the past. However, even though the average amount of time spent increased, Adobe recognized the benefits outweighed the negatives of the new system. The company was seeing both an increase in employee performance and a rise in employee engagement.
The annual performance review is also costly to companies. A company with about 10,000 employees spends around $35 million a year to conduct annual reviews, according to information CEB told The Washington Post. In addition, the average manager dedicates over 200 hours a year on tasks related to performance reviews.
A recent study conducted by consulting firm Achievers found that the majority of CEOs and HR professionals polled agreed that annual, process-driven feedback systems are ineffective and recognized the practice was disliked by employees. Most companies still kept the practice, however, because the annual performance review is a traditional process ingrained in managerial and organizational DNA.
Stevenson believes that eventually, technology is going to take the place of the annual performance review. Data is already automatically being collected on employees and soon, if not now, employers will learn how to break down the information collected. Examples include how much time someone spends on the computer, social network analysis to see who is talking to whom, who emails are being sent to, the volume of emails sent, and much more.
Even though the trend hasn’t completely taken off yet, most data points toward annual performance reviews eventually becoming an obsolete and archaic practice.