Continuous Feedback: Revolutionizing the Annual Review Process

Since their first appearance in 3rd century China, annual job performance reviews have been loathed by both managers and employees alike.

And recent studies show the dislike is as strong as ever. One study by CEB found 95 percent of managers are dissatisfied with their company’s performance review process. Further, the same study found 90 percent of HR leaders say the process yields inaccurate information.

Studies like these are prompting several forward-looking companies to revamp the ancient practice. Last month Accenture announced it was remodeling their annual review process for its 330,000 employees. With the move, the company joins Microsoft, Gap, Google, Yahoo, Adobe, and Medtronic as major corporations rethinking their review process.

Costly, Inaccurate, and Dispiriting

This move is part of a small, but hopefully growing, movement. Currently six percent of Fortune 500 companies have gotten rid of employee rankings, having grown weary of the time-consuming paperwork and resentment involved. According to CEB, the average manager spends more than 200 hours a year on performance review-related activities, including training sessions, filling out forms, and delivering evaluations. The estimated cost of this for a company of 10,000 employees is roughly $35 million.

These costs could be perhaps be tolerated if the results generated tangible improvements but, in the words of Accenture’s CEO, “the outcome is not great.”

All too often annual performance reviews are skewed by the most recent developments rather than surveying the entire year, fixate on the past instead of making a plan for the future, and come across as antagonistic. Even employees who receive positive reviews consider the process a negative experience which encourages disengagement and restricts creativity and growth. One study, featured by the American Psychological Association in 1996 found that while employee reviews generally improved performance, they negatively affected performance more than a third of the time.

Studies also indicated those who did best in the annual review were likely to be the most narcissistic and self-promoting, not exactly the type of employees deserving of promotion to leadership posts.

Moving Toward A More Fluid System

Current annual review systems have three big problems - they don’t measure performance accurately, don’t encourage good business outcomes, and, most importantly, don’t measure performance in real time. Often conducted once annually, employee reviews are usually handled with all the enthusiasm of a trip to the dentist, something to be dreaded and endured.

To counter this lag in real time information, smart companies are moving towards a more informal “check-in” process that takes place more often throughout the year. As part of this, Accenture is moving from a once-a-year rankings system to a more fluid, ongoing system of check-ins. They join Microsoft which ditched its ranking system in 2013 and moved to a monthly manager-employee conversation model while both Google and Yahoo moved to quarterly check-ins.

In these systems, employees receive more timely feedback from management and their peers on what they’re working on at any given moment. It’s a move towards something termed “continuous feedback” that stresses "the one thing that performance evaluations should not be is a 'surprise.'"

The improvement of employee performance through continuous feedback is something we’ve seen time and time again here at Vocoli. Our software is specifically designed to foster this type of communication and allow managers to give feedback to employees in a timely manner, specifically for employee suggestions.

All too often good employee suggestions that could radically improve a business (as they have at Toyota, 3M, and Facebook) fall through the cracks either through mismanagement or by deliberate design. Unfortunately, this breakdown in communication is corrosive as no employee is inclined to submit ideas when they see others being ignored.

Vocoli software rebuilds the circle of trust; when managers demonstrate their receptivity to good ideas, more ideas are submitted. One client of ours received over 200 suggestions in the first month of operations. Employee suggestion systems, like the annual performance review process, used to be hamstrung by inefficient bureaucracy. It’s an encouraging development to see companies move towards more effective, dynamic models which both engage employees and improve profitability.

If your organization is ready to move the needle from dated to forward-thinking, then it’s time to give the Vocoli team a call at 888.919.5300.