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HR leaders beginning to abolish the annual employee performance review

Experts have long decried the downsides of the annual employee performance review model. Now it seems some HR leaders are taking heed.

Employees and managers alike dread the annual employee performance review, and in response, forward-thinking HR...

leaders are radically remodeling the process. But they're not aiming to lessen anxiety by de-emphasizing performance appraisals, or abolishing them altogether. They're pushing for more reviews, more often.

At last week's Employee Engagement Conference hosted in Chicago by the Human Capital Institute, human resources (HR) leaders presented a multitude of strategies aimed at increasing engagement -- from social recognition programs to wellness initiatives. However, one common theme ran throughout: Several speakers said their organizations no longer did employee performance reviews on an annual basis.

In addition, some said they're also making changes to the feedback process that lets employees review the organization. While most HR departments distribute engagement surveys, some speakers attested to actively seeking feedback from other channels, such as internal social collaboration networks or external social media platforms.

Performance reviews moving from annual to quarterly

A change in the review process at Adobe Systems, a software company based in San Jose, Calif., stemmed from the desire to increase employee engagement and drive performance, according to Ellie Gates, Adobe's director of global management effectiveness and performance. While she knew instinctively that the process wasn't ideal, her team had hard numbers in hand after calculating the return on investment.

"We had the equivalent of a full-time startup dedicated to review," Gates said. The team determined that managers were spending eight hours on employee performance reviews for each of their direct reports. Company-wide, the time spent on reviews clocked in at 80,000 hours a year -- the equivalent of 40 full-time workers.

Gates also said attrition surged each year after reviews were finished. And it wasn't low performers leaving, but average to high performers.

In early 2012, the organization set change in motion by holding focus groups with managers and by crowdsourcing employee feedback on changing the review process through a blog post on an internal social collaboration network. Responding to comments about the ineffectiveness of staff rankings -- one manager called it a "soul-crushing exercise" -- the organization decided to scrap rankings and focus instead on increased feedback.

The revamped "check-in" performance review model was launched in January 2013. Gates explained that two-way feedback is now a continuous process, while compensation reviews remain an annual event.

And the shift is already having an impact on both attrition and engagement. According to an employee engagement survey conducted in July, overall engagement of Adobe's workforce is up 1.2%, and intent to stay increased 1.5%. In addition, there was 40% less turnover this year in the second quarter -- when the company typically saw a spike -- and overall voluntary attrition is down 25% year to date.

However, involuntary attrition is up 55%, but Gates said this is actually a positive result. Because Adobe's business model is shifting from boxed software to cloud-based subscriptions, it's important for managers to weed out people unable to make the shift. Gates said the more constant feedback model is making those decisions easier, since managers are able to touch base with employees more often in a less formal way. After all, "who ever wrote the really hard things in the annual review?" she pointed out.

Two additional speakers said they changed the employee performance review process to more aptly fit their businesses.

Should performance reviews include crowdsourced data?

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Ginger Gregory, chief human resources officer at Dunkin' Brands, said the impetus for altering the review process at her organization was to better align feedback with the operating model. "Our business is retail, [and] in many cases 24 hours a day, seven days a week. Things change and so we don't want to have an annual performance review for our employees because it doesn't match up with our business," she said.

This is the first year that the Canton, Mass.-based company has ditched the annual employee performance review in favor of quarterly check-ins. "We're moving towards a [model of], 'How are you doing? What should you do differently for next quarter? What did you do well?'" Gregory said. "It's sort of [like] constant coaching." She added that the company is also getting rid of performance ratings, although compensation decisions will still be based on reviews.

When Oakland-Calif. based Internet radio service provider Pandora scrapped the traditional review process, it didn't institute a clear replacement system. "We have a process where the employee actually determines which way they want feedback," said Ed Martin, Pandora's chief learning officer. "Do they want it more frequently [and] unwritten, or do they want it once or twice a year in a written format?"

Martin also mentioned the organization's business model in his explanation. "We try to personalize [reviews] very much like we do [with] music."

Garner employee feedback through collaboration and social networks

But how does feedback flow from employees back to the organization? While employee engagement surveys and performance review comments have historically acted as the feedback mechanisms in this direction, they're just the minimum today.

"It's so easy now to do engagement surveys," Gregory of Dunkin' Brands said. "Think of the tools we now have. If you wanted to do an engagement survey, you could do a Survey Monkey [survey] this afternoon probably via your phone."

Although Dunkin' still believes in and does regular engagement surveys, Gregory said, the company has also instituted "stay interviews" where managers ask employees point blank about their areas of dissatisfaction.

"We ask people, 'What do you love about your job? What do you hope for in a year? Is there anything that could cause you to leave us?'" Gregory explained. "Ask them outright."

Monika Fahlbusch, senior vice president of global employee success at technology vendor, said the San Francisco-based organization actively solicits and welcomes feedback to help shape HR strategies and policies.

For instance, Salesforce has Chatter, the vendor's enterprise social collaboration product, deployed internally. Fahlbusch said she often pitches ideas on Chatter directly to employees to gauge their responses. In one case, after suggesting unlimited paid time off, "I blew up Chatter," she said.

But it's not just positive feedback that's welcome. On a Chatter group called "Airing of Grievances," employees are welcome to post complaints, although they are not permitted to do so anonymously. With this policy in place, Fahlbusch said the company hasn't had problems with inappropriate use.

She also encouraged companies to monitor external social media networks for feedback. She pointed out that employees will post comments about work on their Facebook or Twitter accounts, and if an employer joins them on these sites, executives can "hear" honest feedback.

Another place Fahlbusch actively listens is Glassdoor, a website where employees can anonymously post employer reviews and compensation information. And this isn't taken lightly; Glassdoor data is presented to executives on a quarterly basis, she said.

Emma Snider is the associate editor for Follow her on Twitter @emmajs24 and the site @SearchFinApps.

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