There were more than few eyebrows raised recently when Accenture, one of the biggest companies of the world, said it was ditching annual performance reviews and rankings. An organisation of its stature announcing such a decision seemed almost revolutionary.
While undoubtedly flawed, these management processes have been used by leading organisations to assess employees for years. Despite them being loathed in equal measure by management and staff, they have generally been seen as the best way to measure behaviour and development at work.
The tide is turning, however, with more of the world's largest firms – including Microsoft, Adobe, Deloitte, Medtronic and Gap – all coming to realise there are alternatives.
"We're going to get rid of probably 90 per cent of what we did in the past. It's not what we need. We are not sure that spending all that time on performance management has been yielding a great outcome," said Accenture's chief executive Pierre Nanterme in an interview with the Washington Post in late July.
The professional services firm, which employs 300,000 people across 120 countries, has said it intends to introduce a more flexible system from September. This will include ongoing feedback and coaching for staff.
"We are shifting from an annual performance management process to a new approach called Performance Achievement, which includes real-time, forward-looking conversations with our people about priorities and how they can grow their strengths," Ashling Quaile, interim HR director at Accenture Ireland told The Irish Times.
“This new approach will provide a holistic view of performance and potential that will inform the talent decisions that we make, such as rewards and career progression . . . [IT)]is designed to foster quality conversations between leaders and our people – they will spend more time coaching and talking with them and less on time-consuming administrative activities,” she added.
This all sounds very touchy-feely, particularly when compared to the infamous 'rank-and-yank' system made popular by former General Electric (GE) chief executive Jack Welch and later used by the likes of Microsoft with mixed results. That somewhat brutal process involved rooting out the worst performers and firing them. However, research is increasingly showing that traditional types of performance management that seek to foster competition among employees are generally not effective.
"Reviewing performance is still seen as important but Irish as well as US and UK organisations are increasingly recognising that they badly need to overhaul how they do it because their current practices are actually demotivating their staff," said Denis Coleman, chief executive of Cork-based HR software firm WorkCompass.
“The most common reason companies tell us they are overhauling their performance management processes is that their staff just don’t see any value in it. Traditional annual appraisals don’t help improve individual or group performance and in many cases seriously damage it,” he added.
A recent survey from Deloitte found that just 8 per cent of companies believed their performance management process were driving high levels of value, while 58 per cent said it was not an effective use of time.
Part of the problem, according to Annette Clancy, a lecturer in organisational behaviour at UCD School of Business, is that many organisations don't fully consider what exactly they are trying to monitor and often select one-size-fits-all measurement models that are not fit for purpose.
“There seem to be two main reasons why the tide is turning against traditional performance review processes. Firstly, the cost-benefit ratio isn’t working anymore due to the amount of time it takes to implement these reviews. Secondly, people are overwhelmingly negative about the whole experience, with most finding it to be little more than a box-ticking exercise,” said Clancy.
“Performance management systems are based on a hierarchically-structured basis and usually go in just one direction, that being top-down. They also generally look at individuals in isolation from the system in which they are working and so don’t consider related issues such as what support an employee has.
“Lastly, politics and power are inherent in these processes and it is highly questionable as to how honest a conversation an employee is likely to have with someone who has the potential to make your life miserable,” she added.
Clancy doesn’t think that such processes are totally without their use however.
“Employees can receive very useful feedback on their performance and it can contribute to development plans and training so it’s wrong to say it is an entirely cynical process. It does depend on the spirit in which these exercises are undertaken and if there is proper follow-up,” she said.
Smaller start-up organisations, which tend to have a less hierarchical structure, are leading the way in rejecting traditional measurement approaches in favour of processes that include more mentoring, regular feedback and hands-on active management.
Nonetheless, according to Mary Connaughton, managing director at CIPD Ireland, a professional body for HR and people development, performance management processes are in place in over two-thirds of organisations locally.
“In my experience, we are seeing an upheaval in how employees are managed and engaged as we learn more about the drivers of behaviour, and the effect of managers and company culture on motivation and performance.
“Many HR leaders are aware that processes need to be revised to give greater emphasis to having employees who demonstrate appropriate values and behaviours, are innovative and customer-centric, and supportive of colleagues,” she said.
“The traditional approach of converting a year’s performance into a single rating for an employee has grown into disrepute. Many managers have an aversion to having a meeting – labelled a ‘conversation’ – to summarise and rate an employee’s contribution over the previous 12 months. Where ratings are linked to reward and a bell-curve, the focus of the employee is often on the pay/bonus impact and the attention on behaviour and development gets lost,” Connaughton added.
Coleman believes annual reviews will soon be replaced by ongoing check-ins that are about coaching for future performance rather than just making judgments about past behaviour.
“Critical to the success of this is coaching managers on how to have these new performance conversations,” he said. Connaughton agrees.
“We are already seeing more emphasis on enabling managers to have engagement and conversations, explore career paths and support employees to find purpose in their work.
“However, I have found that this is dependent on upskilling managers to provide feedback, recognition and coaching and many companies are still struggling with developing leaders and managers to deliver this.
Connaughton believes, however, that this is an area where technology may come to save us all from the dreaded one-to-one annual review.
“As real-time performance data becomes more accessible and reliable there will be less need for a performance meeting that relies on a manager’s evaluation. In CIPD’s view, increasingly sophisticated data analytics will help companies to understand and promote the specific behaviours that engage employees and drive results. This is an area in which I believe HR needs to build its capability and take more leadership,” she said.