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Here’s an Alternative to The Dreaded Annual Performance Review

December 11, 2015, 3:42 PM UTC
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Dear Annie: Once again it’s almost time to do year-end performance appraisals for the 28 people who report to me, and I’m envying managers at companies that have gotten rid of this tedious, time-wasting process. One encouraging thing is that my employer, a midsized manufacturer, also seems to be moving in the direction of replacing annual reviews with more frequent (and useful) kinds of feedback.

HR still wants periodic “progress reports” on each employee, but they’ve left it up to each manager to decide what form these should take for his or her team. I’ve been researching what approach to take in the year ahead and I’m just wondering, do you know of any simple, effective way to evaluate performance? I’m looking for maximum impact with minimum B.S. — Pittsburgh Pete

Dear Pete: As you’ve gathered, lots of companies are trying to move away from annual reviews, and for good reason. Only about one quarter (26%) of managers and employees think the traditional process works, according to a new survey of 169 North American companies by compensation consultants Towers Watson, and 50% of employers in North America say they are scrapping yearly appraisals in favor of real-time conversations about goals and performance.

“Business moves much too quickly today for annual reviews to be effective,” observes Roger Ferguson, head of consulting firm Big 5 Performance Management and author of Finally! Performance Assessment That Works. “People want immediate and meaningful feedback, which is why good managers coach their employees all day, every day, without a formal process or system.”

At the same time, though, your HR department still needs “documentation in the event of an EEOC or NLRB claim or charge,” Ferguson adds. “We are, after all, a very litigious society.” That’s a major reason only 8% of the employers in the Towers Watson survey say they’ve gotten rid of formal evaluations entirely (and why your HR department is still asking for “progress reports” in writing).

So, in addition to the day-to-day feedback you’re probably already giving your team, what kind of simple, useful paper trail can you create? One approach is what Ferguson calls Big 5 performance management, which he used to replace annual reviews during his 30-year career as a senior executive in HR and operations at JPMorgan Chase and Fluor.

Big 5 asks employees and managers to focus on two questions: What are your five most significant accomplishments since our last meeting? And what are your five biggest goals until next time?

These can, and probably should, be short lists — often no more than half a page — and the time period between them can be a week, as with many sales teams, or a month. The point is to keep people “nimble and focused, creating a sense of urgency,” Ferguson says. Each report also, of course, gives you a straightforward way to tell team members how they’re doing, and suggest any changes you’d like to see.

One advantage of Big 5, Ferguson says, is that it builds on the way people naturally approach their work, mirroring the to-do lists most of us make anyway. “We already do a great deal of planning, prioritizing, and reporting. Why not document that effort and use it for appraisal as well?”

A side benefit of Big 5 is that “most employees enjoy taking credit for their contributions,” he notes. At one Big 5 client company that adopted the method, a receptionist doubted she could come up with five achievements and five goals per month, because “she said all she did was answer the phone,” Ferguson recalls. “After her first Big 5 report, though, she told me, ‘Until I wrote it down, I had no idea how much I get done around here!’” Giving everyone a formal chance to brag a little to the boss on a regular basis “can create energy in the workplace.”

Of course, you’ll have to set time aside, at whatever intervals make the most sense for your team, for discussions with your team members, and “no system can make a manager care about coaching if he or she doesn’t see employee development as important and worth spending time on,” notes Ferguson.

But since Big 5 conversations take place so much more often than every 12 months, and focus on the present and the immediate future (rather than the distant past), the time you invest in talking about performance is far less likely to be wasted.

A word of caution: Beware of “creep,” which Ferguson says “occurs when managers want to keep, or add back, some elements of the old appraisal process — assigning employees a numerical ranking, for example. If that happens, before long, Big 5 or any other new approach can begin to look a lot like the tired old process we’re attempting to revise.”

Good luck.

Talkback: Does your company still conduct annual performance evaluations? If not, what are you doing instead? Leave a comment below.

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