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Many reasons to keep a formal performance review process

The boon in continuous performance management and employee engagement software doesn't justify replacing reviews with informal feedback mechanisms. Here are some reminders why.

In recent years, a number of organizations have replaced their formal performance review process with less structured...

processes. In part, they were looking for something that provided more immediate feedback to employees and didn't involve a time-consuming, year-end process.

A key word in that phrase is "formal." In some cases, the form and processes became almost more important than the words in the review and took on a life of their own.

While this new approach, which is often called continuous performance management, may reduce the time people spend reviewing and discussing an employee's performance, it may also impact other processes, such as compensation management, that depend on a documented review.

Performance reviews never had to be this complicated and cumbersome or limit employee feedback to once a year. It's still possible to streamline the digital forms and processes while maintaining the value of the performance review.

Consider some of the following key benefits of the performance review:

  • Providing employees with feedback about their performance. While the performance review process is not always as easy as it should be, you can’t discount the fact that employees are at least receiving feedback. Good managers will provide clear and immediate feedback to employees throughout the year regardless of a company's philosophy on performance reviews. However, the more traditional review process will ensure all managers, including those who rarely provide feedback, meet with employees and provide feedback. This is not just about confronting poor performance. It is more about recognizing solid performance, making sure employees are aware that they are appreciated and providing recommendations on their personal growth.
  • Compensation planning.  A completed performance review form is a summary of an employee's past performance and ideally sheds light on their future potential. Organizations want to spend more on the people that support their success. When they're deciding on salary increases, they can use the performance review process to help identify employees who deserve more or less of the budget.
  • Promotions. Promoting employees is a process that relies on consistent feedback about each employee. You want to ensure you are promoting your top employees, and have both quantitative and qualitative data to support this important decision.
  • Succession planning. When choosing employees to be successors in your company, you want to make sure you pick the right ones, since you will have to invest time and money to ensure they are prepared when the time comes to succeed someone in a new role.
  • Holding managers accountable. Formalizing a performance review process requires managers to put in writing what they believe are an employee's good qualities and those that need to be developed with an understanding that sub-processes like compensation management will rely upon this feedback.  It's even more effective when how well they manage the performance review process is included in each manager's own review.

When the performance review process is replaced with informal chats -- even if it's facilitated by specialized software -- where does that leave the employees?

For one thing, some employees may still not receive feedback from their manager. If managers don't enjoy giving feedback or aren't being measured on leadership and how effective they are in developing employees, they may just avoid it all together. Good performers may be left wondering how they are doing, and poor performers might think they don't need to improve their performance.

Whether or not there is a traditional performance review process, employee performance may still be evaluated to support sub-processes, such as compensation and promotions. If management is still completing reviews for those sub-processes but not sharing the results with employees, employees will no longer know how their performance is being valued, and may become concerned about the lack of transparency and the fairness of the process.

It's still possible to streamline the digital forms and processes while maintaining the value of the performance review.

Dropping formal reviews has legal implications.  A progressive discipline process is a necessary component of a consistently managed performance management process.  If an employee's performance is not meeting expectations, it's important to follow a consistent, transparent and organization-wide process.  This ensures that if you need to terminate an employee for poor performance, you have demonstrated that they were given clear, immediate feedback with examples, and an opportunity to improve.

Exclusive reliance on informal chats carries the risk of top employees receiving little or no feedback, which could lead them to believe their efforts go unnoticed. Sometimes positive feedback only comes after they have resigned.

Some organizations have implemented employee engagement software to help recognize employees for going above and beyond. But do these applications provide too much recognition for employees in customer- or employee-facing roles, leading to an excessive amount of recognition? There may be employees in your organization who are critical to your company's success but aren't well known outside of their group. If they receive fewer stars and the potential benefits that come with them, will they feel less valuable?

Finally, traditional performance reviews should capture an employee's performance over the entire review period, such as a full calendar year. It should also capture lessons learned and feedback on their growth and development.  If an organization's reliance on less formal methods leads to evaluations that only cover the last few months of the year or a recently completed project, there won't be enough information to demonstrate the bigger picture.

Steps toward a more effective process

There are other options besides eliminating the performance review process altogether. It may take a shift in mindset, however, not to mention additional management training.  If the goal is to provide employees with clear, consistent and transparent feedback and capture that feedback in an easy way, you might consider the following possibilities:

  • Eliminating fields from forms. Evaluate each field and decide if it's critical to the process. Some forms try to capture too much information and therefore take significant time to complete.
  • Forms are too complex. In today's world, people should be able to look at the form and know what to do without having to read a manual. Remove any field, calculation or checkbox that can't be easily understood.
  • Ratings are too precise or uninspiring. Many performance-review forms require you to pick a number or word that describes an employee's year-long contributions, combined with keeping a bell curve of ratings. This leads to the majority of employees getting a 3 out of 5, or "meets expectations" rating.  If you were in school, you would probably be disappointed with a 60% average, but in the corporate world this is supposed to make you feel good. Something along the lines of "Keep up the good work," or "Your contributions are valued by the company" would feel a little better.
  • Inefficient or ineffective processes. Does each step in your process add value? Do employees know what's expected of them at each step? Can the process be simplified and still provide the necessary value?
  • Feedback goes unused. If you want managers and employees to see the value in the process, use the feedback you receive when you promote, give raises or terminate employees. If managers see value from the process, they are more likely to put in the effort required to provide regular feedback, have difficult conversations and document it all.

The performance review forms and processes used in many companies do not have to be so challenging. Review what's working and what's not and find ways to ensure the process is adding value and both employees and the organization are benefitting.

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