Backing the business case for ditching annual appraisals
Written by Dan Parry • 30 March, 2022
Leadership Article
The traditional system of appraisals, condemned by managers and staff alike, has been abandoned by more than a third of US companies. In the so-called ‘performance management revolution’, the annual knee-trembling conversation is being replaced with a process that’s more human and helpful. What is this process, how can leaders implement it – and why should they do so?
Appraisals serve many purposes, in theory. They allow managers to get to know their people, agree annual objectives and review past performance. They are a chance to consider advice and guidance, ratings and comparisons, pay-rises and bonuses.
However, many businesses adopted annual appraisals years ago, for reasons that made sense at the time but are now often a muddled mix of the above. For some, the system lingers on – even though ratings and comparisons are 1960s thinking, annual objectives have been superseded by agile targets, and pay rises are not always on offer. The business case for an overhaul of the system comes down to three key points:
In recent years, there’s been a radical shift in social thinking. Renewed empathy and humanity have brought Diversity and Inclusion initiatives to the fore. Many managers no longer believe that the best way to motivate someone is to meet them once a year to assess work done months earlier.
In the years before Covid, big business often lacked transparency and trust. Many people felt that their sense of identity was eroded by a lack of influence in the social contract – the unwritten balance of power between employers and employees. The pandemic changed everything. People were empowered by working from home, many are now less willing to put up with old practices, as the great resignation demonstrated last year. The balance of power is shifting, employees expect more from their employer. As a result, the mindset behind annual appraisals is looking tired and out of date.
A survey by leadership consultant CEB found that managers spend an average of 210 hours a year in performance management activities. How much value does this work achieve? In an article entitled ‘Performance management is broken’, Deloitte found that 58% of companies believe their performance management process is not an effective use of time.
In an article for People + Strategy Journal, Deloitte’s former system of annual appraisals is described as “an investment of 1.8 million hours across the firm that didn’t fit our business needs anymore.” For Jena McGregor in the Washington Post, antiquated review systems are no more than an “annual rite of corporate kabuki”.
Employees often regard annual reviews as a test of nerve and will, many struggle to get the most out of their appraisal. Things apparently aren’t much easier for managers, either. A study by Leadership IQ of 48,000 employees, managers and CEOs, found that only 13% believed their review process to be useful. “As the appraisal process is currently designed, nobody thinks it adds much value”, the study’s authors concluded. Similarly, research by Gallup found that only 14% of employees strongly believe their performance reviews inspire them to improve.
In particular, the Leadership IQ study identified two problems. Firstly, respondents said that only 22% of leaders are always able to distinguish between high and low performers – leading to questions about the purpose of a performance appraisal in the first place. Secondly, managers don’t always have time to prepare for an appraisal. Bearing these thoughts in mind, it’s no surprise then that while 95% of employees believe that appraisals should reference specific events from throughout the year, only 14% believe they actually provide relevant and meaningful feedback.
So what’s the alternative? Leading tech companies such as Adobe, Google, Juniper Systems, Dell, Microsoft, and IBM have replaced once-a-year conversations with regular feedback. So too have professional services firms such as Deloitte, Accenture, PwC and KPMG, along with early adopters in other industries, among them Netflix, Gap and Lear.
Many larger companies have created apps that allow managers to give feedback whenever they want, recording it if they need to. Some apps allow employees to ask for guidance when they need it, or provide feedback to peers. These messages easily allow managers to review material when they need to award pay rises, offer promotions or identify someone who may be under-performing.
Regular updates provide timely advice and guidance. Instead of discussions about work done a long time ago, better to switch to an assessment of current performance. Through ongoing feedback, problems can be resolved quickly and effectively.
Businesses no longer have clear annual cycles, projects are short-term and likely to change. Jobs are more complex than in the past, an annual set of objectives is unable to adapt to developing events such as hybrid flexibility, Covid concerns or war in eastern Europe. Targets need to be set, discussed and reviewed far more frequently than once a year.
Moving from an annual discussion to regular feedback represents a shift from accountability to learning. Rather than dwelling on what went wrong in the past, ongoing feedback focuses on the skills that ensure things go well next time. New joiners, especially, are keen to explore learning and development opportunities, particularly early on in their career. By focusing on new skills, ongoing feedback supports career progression more readily than a backward-looking annual conversation.
Some companies fear that reducing their reliance on assessment data may make it harder to measure performance against targets. But this sentiment implies that a manager may struggle to understand an employee without a spreadsheet. Human assessments can be more wide-ranging than a narrow range of numbers, and present a more accurate picture.
Drop the assumption that you as a manager know your team well, instead get to know them through open-ended questions and informal chat sessions designed specifically to build trust. This will encourage people to find a state of mind better suited to teamwork and creativity.
In the transition from accountability to development, managers are encouraged to consider their role in coaching employees, helping people improve their performance. By bringing humility and curiosity to feedback sessions, managers can further develop their efforts in building trust.
Employees should be encouraged to seek feedback from a range of sources so that they know their future rests on more than one opinion. They can choose who to speak with and when, and they should have the opportunity to air these wider opinions in feedback sessions with managers.
Employees should be encouraged to take an active role in setting their own operational and developmental goals, in partnership with their manager. This shows them the value of their role within the team and helps them feel more connected to their career path.
The old system of appraisals is among the least popular practices in business. The question for managers is not whether this is true, but why. Telling an employee about something they did six months ago is of little help in a rapidly changing environment. In providing regular contact, managers can maintain a more authentic relationship with members of their team, setting measurable goals and assessing these in real-time. In motivating and inspiring people, it’s time to abandon backward-looking reviews, and instead look towards a more meaningful use of your time.
Get more from your regular feedback sessions, with our courses on:
Constructive Feedback Training
Managing Difficult Conversations Training
Personal brand workshop
Managing Up Training
Get our latest insights by subscribing to our newsletter. Each week you'll receive updates helping you to understand and respond to the challenges facing your organisation. We won't share your details with anyone and you can unsubscribe at any time.
Learn to tackle the day-to-day challenges faced by women in the workplace with confidence, control and conviction.
This fast-paced interactive talk delivered by our motivational keynote speakers provides insight on how women can communicate with more impact and how they can develop within a leadership role by enhancing their personal presence. Our women’s speakers aim to help you build the confidence to be included in meetings, and raise your visibility as an authentic and influential leader. This talk can be tailored to your business and any specific requirements you might have.
The founder and CEO of Working Voices, Nick Smallman has been at the top of his profession for 25 years. Advising global blue-chip clients on engagement, productivity, and retention, he counsels leaders on increasing revenue via simple cultural adjustments.
Overseeing the successful expansion of Working Voices across the UK, the US, Asia, and the Middle East, Nick supports the leadership and communication capabilities of clients in a wide range of sectors. In particular, he has advised companies such as JP Morgan, Barclays, Sony, Nomura, M&S, and Blackrock for more than 15 years.
Developing his reputation for thought leadership, in recent years Nick has been leading work on The Sustainable Human, the subject of his forthcoming book. A concept unique to Working Voices, The Sustainable Human offers a package of solutions focusing on leadership enablement, future skills, and cultural harmony.
Working closely with HR specialist Mercer, Nick has developed solutions to four key modern workplace challenges:
“I’m excited to share the conclusions of three years of research that, if implemented, can make an immediate practical difference to leaders and their organisations.”
All articles by Nick Smallman
Our motivating keynote speakers will help you to gain an understanding of how you present yourself to others and how they identify with you. You’ll also gain an understanding of how influence and the development of a personal brand can enhance your impact. In this enthusing talk our expert business speakers will explore the practicalities and techniques involved in developing a suitable personal brand and creating a strong personal impact.
Networking skills are important for achieving success in business. This talk delivered by our engaging keynote speakers will provide you with an insight into good networking etiquette. Our business speakers will focus on understanding the importance of networking, how to plan and prep before an event. You’ll learn some good tips for reading group body language and some essential icebreakers to get you started.
Parents all over the world are becoming increasingly worried about the effect of screen use on their children’s mental health. In addition to a lack of understanding as to what they are looking at there is the deeper issue of how online behaviour is shaping the way that children think and form relationships. We unpack the neuroscience behind the addictive nature of screen time and offer a blueprint to help parents coach their children towards a more fruitful relationship with the internet.
The internet is lauded as a giant leap for communication and a vehicle for mass connection in a busy world. What is also becoming clear is the opportunity for bad actors to manipulate important social, cultural and political conversations through the dissemination of misinformation and disinformation. We lay bare the methods that are used to inject confusion and grievance into the conversation and how we as consumers are not naturally wired to combat this. We will offer a framework to help protect you from fake news, distraction and getting sucked in to destructive communication
70% of people will experience a genuine fear of being exposed as not good enough, of being a fraud in their working lives; this talk will help you combat such feelings and deliver practical guidance that will help you feel confident and comfortable when taking on the next big challenge.
In a world dominated by showmen, charismatics and influencers it is becoming more and more difficult to find leaders that are intellectually credible as well as influential. The ability to think critically is being downgraded while the ability to attract attention is lauded. It is possible to do both and we will show how strong mental models can underpin a long-term leadership persona.
The self-help industry is an ever expanding and hugely popular vehicle for personal development. Humans have an innate desire to improve themselves and raise their status – what’s not to love? However, some of the ideas and tropes used in many of the self-help products available rely on flawed thinking to be successful. We explore 6 major themes, deconstruct their effectiveness and relevance in the modern world and provide an alternatives that are more effective.
“Your personal brand is what people say about you when you’re not in the room.” Jeff Bezos (Founder and Chairman of Amazon) that’s why it matters so much. It’s all about creating the right external impression, ensuring it is authentic and makes you stand out from the crowd. This inspirational talk by our expert keynote speakers will explore the methods, techniques and practises of developing an authentic personal brand that gets you noticed.
Presenting can be a daunting ordeal at the best of times but this highly interactive and fast paced talk will help build your confidence and improve your delivery with any audience. Our keynote speaker will take you through how best to prepare for your big moment, along with helping you look and sound the part as well.
TED Talks can be both informative and inspiring, but how do the best speakers deliver their message with such impact? In this talk, one of our inspiring keynote speakers will walk you through the TED method and help you deliver your very own idea with confidence and precision.
Emotional intelligence is about the ability to identify, assess and manage the emotions of yourself, of others and of groups. Having a high EQ will improve your ability to maintain good working relationships and communicate successfully. This highly interactive talk will give you a practical insight into how emotional intelligence works. Our expert keynote speakers will give you a concise overview of the emotional intelligence know-how and stratagems you need to interact commendably with clients and colleagues.
Making a good impression and having a strong personal presence is an important part of being successful in business and in life. Personal impact is about having presence and charisma. In this engaging talk our motivational keynote speakers will explore what both of these actually mean, what they look like and feel like. We will look at the practicalities of each and punctuate both topics with brief exercises to help you to become more aware of the way you interact with others. This is an exciting and interactive talk which our expert business speakers deliver in an inspirational style.
Successful people are super communicators – they think clearly and are expert at interacting with others. They understand themselves, other people and know that superior relationships are the cornerstone to a fulfilling life These characteristics are learned attributes. Now you can master these skills and behaviours and work towards becoming a super communicator yourself.
Improving your influencing skills is important in helping you to build better rapport and have positive relationships with your clients and colleagues. This fast-paced talk delivered by our expert business speakers helps you to explore and develop your existing influencing skills. Our inspiring keynote speakers will focus on maintaining mental and linguistic flexibility when interpreting and presenting information helping you to become an effective influential leader. Our keynote speakers can adapt this talk to your business needs and requirements if requested.
Our sentiments and feelings towards people are created by our own experiences but we’re not always aware of how those sentiments affect the way we act towards people and make decisions about them. Our engaging keynote speakers will bring to light your unconscious bias in this thought provoking talk: how it works, the affect this has on decision making and most importantly, what you can do about it; making sure you are the inclusive leader you wish to be.