End of Year Reviews are a Terrible Idea
There’s nothing like returning to work after post-Thanksgiving holiday food comas. The best part is you get to prep for one of the most dysfunctional, time-wasting, intellectually insulting, and leadership-lazy exercises known to mankind: the end of year review.
They’re stupid. Period.
And before you go all “I don’t need to read this – I’m a business leader and HR people are the ones who do performance management” you need to sit down, shut up, and read because if you have that mindset, you’re a huge part of the problem.
How failed is our leadership culture that we have to sit around and wait for HR or executive management to dictate when and in what form we must critique the people on our teams?
How messed up is it that we have to rely on compulsory forms with rating scales to tell people how they’re doing?
How sad is it that we have to hold cross-calibrations to stack rank people and force a performance distribution because our managers lack the ability to look outside their own organization and assess comparable levels of talent and performance?
We’re a management disaster, people!
I’ve written plenty on the dangers of bad feedback, the importance of self-appraisals, the requirement to fix bad performance before it becomes terrible performance, and how awful butt sandwiches taste. Add this post to the list of rants about why our performance management systems are broken and what we as leaders need to do to fix them.
If someone works for us for 365 days, we owe them much more than a once-a-year sit-down to discuss their performance. We owe our organization more than looking at all personnel once every four seasons. If we truly want to get out of the rut of annual performance reviews being as palatable as beet and Brussels sprout casserole, we have to create a new culture around reviewing performance. Here’s how we as leaders can do that:
1. WE own the process (not HR): Don’t blame HR for the performance review process being broken. It’s our fault as leaders if it is. HR is there to support the business. If the process is broken, it’s because we allow it to be that way. Take back the process and ensure it suits the business’ needs (improving our talent, keeping the best talent, moving weak talent to new roles). We need to quit abdicating responsibility for the process.
2. Feedback happens DAILY: If we get lazy as leaders and rely on an annual process to tell us when to tell our folks how they’re doing, we shouldn’t be surprised if they’re disgruntled, confused, don’t trust us, and quit as soon as a better opportunity comes along. We need to kick out the crutch of the process “telling us when to give feedback” and take our jobs as leaders seriously. When something “feedback worthy” happens, have the conversation with your team member right then and there. The annual review should be nothing more than a summary of all the conversations you’ve had over the course of the year.
3. Get out of the silo: Cross calibrations to ensure we have a distribution of talent across the performance spectrum is a control mechanism to keep those of us living in silos from doing stupid stuff. We need those cross calibrations because we have no idea how good or bad the talent outside our immediate team is. We need to get out of our offices and go meet people. Speaking with other leaders in the organization about their team members builds relationships and helps us understand where our people fit in the broader scheme of things. If we know that, we can more accurately and fairly rate their performance on a relative basis.
4. We don’t get paid to be liked: We avoid performance appraisals and feedback conversations because we have to tell people unpleasant things about their performance. Instead of stepping up and delivering the tough messages, we hide behind “well I think you’re the bees knees but the folks in the calibration session rated you lower” or “HR’s performance appraisal process requires me to rate you this way even though I don’t think you’re really as terrible as they make it sound.” We need to get over it. Some people won’t like us. We’re not paid to be liked as leaders. We have to deliver tough messages. If we own those messages and deliver them as soon as they’re relevant our teams will perform better and actually trust us more. We need to understand we aren’t at work to be liked – we’re there to do a job and we get paid the big bucks to have the hard conversations.
5. Pay for performance: We need to quit being cowards and spreading bonuses like peanut butter. Not all performance is even but we pay people like it is. Oh sure… we pretend we’re differentiating pay for performance but giving your highest performer a 2% raise and your worst performer 1.5% is a freakin’ joke. Why not give your high performer 3.5% and the low performer 0%? Oh, they might not like us, eh? See point 4 above. And if you want a fuller perspective on paying for performance, you can read a lot more in detail on that subject in this post.
6. Quit complaining: We need to quit complaining about the problems with the year-end process and do our job as leaders and fix it. If our performance culture sucks, it’s because we suck. Culture is nothing more than the sum of all our actions. If our actions are lame and cowardly, our performance review process will mimic that culture.
Are you going to let your performance review process be a disaster this year or are you going to step up and fix it? Oh yes… I absolutely just threw down the gauntlet. Are you up to the challenge?
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Paying for performance ignores the fact that research has shown that most of an individual’s performance is an emergent property of the complex adaptive system they find themselves within and that only 10-15% depends upon the individual in question.
First, I’d love to see that research. Second, base salaries account for the 80% or so that you’re saying is common regardless of the individual so performance payment is on that marginal 10-20%. Pay for performance doesn’t ignore this fact – it’s how it deals with this fact. Also, I’m curious as to how that research defined “performance” because clearly that definition can skew any result (as can focus on a particular industry, job/role, level within the organization, function, etc.). Bottom line – people should be paid for performance and that payment should be sloped accordingly because the deleterious effects of causing a high performer to quit and move to another role where they’re more appropriately compensated (thereby leaving the organization with a less talented organization on average) can create/perpetuate a culture of mediocrity where a company is left with nothing but average or below average performers. That dynamic then makes it harder to hire high performers and a vicious cycle ensues. We can’t look at performance at a single point in time to assess a compensation strategy. The long-term goals and effects of the strategy must be considered and are arguably of greater importance than that single point in time evaluation. If you have the research and can share it I’d be really interested in reading it. Thanks!
Mike,
I don’t agree completely with you position on HR involvement. While each manager needs to own the process I’ve seen where HR involvement can help. My company went to a more structured review process and I’ve seen a couple of benefits:
1. The guesswork is taken out of how performance is measured for the company and employee. It’s like grades in school – not perfect but you get a good sense that a kid getting As is doing better than the kid getting Cs. In our new system we all know what “Meets”, “Exceeds” and “Greatly Exceeds” mean.
2. There is consistency for other managers looking to hire from within.
I agree 100% with your assessment about waiting till year-end to review. All that does is highlight the last month of the year. It’s similar to judges in a boxing match being swayed by the last 30 seconds of the round.
Not only does my boss sit with us quarterly, he asks each direct report to send him their top 3-5 accomplishments every week. It benefits him and it makes us focus on where we’re spending time and what our evolving priorities are.
Brian
I had the pleasure of building an online HR review and merit system for a large Central Ohio company. Some insights:
1.The average employee should be rated around a three on a scale of five, according to best practices.
2.Threes will offend most people, so most manager’s rate to a 4.0 to 4.5 range, the good ones will anyway.
3.The merit raise is absolutely tied into your rating. The higher the rating the higher the potential merit increase.
4.Good managers understand how merit raise are doled out and want to take care of their own.
5.The above information is super secret and no company wants to share this, but it is pretty much how it works most places.
I guess this is more an insight then a comment to this blog, but it might help with the overall picture.
While the structured review system sounds great in theory, in practice it almost always fails miserably. Being an employee stuck in such a system, I have firsthand experience with its downfalls.
Having a 1-4 or 1-5 scale for several metrics generally leads to everyone getting a 2 or 3, with 1s and 4s/5s being incredibly rare (how can you mark someone perfect? That would indicate they can’t improve. Do you see where this is going?) What if two managers interpret the scores differently? How do you account for someone going above and beyond in a way that doesn’t fit into one of the predetermined categories?
Further, having the rating system allows managers to simply hand over scores without needing to explain why you received those scores. I agree that managers should sit down and talk to individual employees, but given a structured system there will be managers that use it to get out of talking to someone face to face (probably a failure of promoting that person to begin with…but few companies get this right all the time).
Finally, a structured system will almost always correlate pay increases with score. How do you incorporate a 0% pay increase with scores? All 1s? 3 out of 5 1s? What happens to the pay increases at the top end? Going off of my first point, everyone ends up with almost identical raises, regardless of performance.
It could be argued that all of these failures of a structured review system are human failures, and not failures of the system. However, until you take humans out of the process altogether, you’re stuck with those failures being the rule, and not the exception.
Hallelujah! Mike, where have you been all my life!
As one of those dreaded HR pro’s my comments may be taken with a grain of salt, but I wholeheartedly agree. Most structured review systems were installed because a lack of leadership and have perpetuated mediocre leadership since there inception.
The systems described by the other comments are not performance management systems. These are “compensation rationalization” systems or “litigation mitigation” systems, they do not contribute to building a performance culture, they are a barrier to success.
Frankly, the vast majority of people managers are ill-equipped to lead so they default to a system or a process. Only the leaders who differentiate their strongest contributors from the pack and have the strength to extract the non-contributors are the ones that retain their talent and achieve extraordinary results, but this requires effort and risk-taking, it won’t come from an HR process.
Interestingly, I have tried on a number of occasions in my HR life to “blow-up” these structured review systems and the greatest resistance comes from the weakest leaders, as they fear the loss of this comfortable crutch.
I’m glad I came across this today, as I kick-off our review process next week. i will keep the faith and remember the Berlin Wall was destroyed brick-by-brick.
Thanks Victor. You raise some great points. We need to keep trying to kick out the crutch of these systems and turn folks into leaders. I love your Berlin Wall analogy (although I’ll be the first to concede that I’m not even close to standing in Reagan’s shadow…). 🙂
Bravo….! As Ken Blanchard would say, “feedback is the breakfast of champions!” Without constant feedback (and many forms of it), your employees can suffer from de-commitment. The job becomes a task rather than something accomplished through purpose.
Thank you for your hard-hitting candor. Great post! Annual reviews are a left over dinosaur from the Industrial Age. The ultimate intent was to improve performance, no? Today’s world involves far more creative work and far less widget making.
Sadly, many people are hired into leadership positions who are not prepared to handle day to day situations or manage conflict. The annual evaluation only perpetuates a passive – aggressive approach to managing your problem employees and will likely encourage your high performers to pursue other options.
“Drive” by Dan Pink is also a great read on better motivators than the “annual review” process. “Carrots and Sticks” don’t work anymore.
Thanks for the kind words Joy. Absolutely agree with your points. All we can do is call these things out and hopefully give people the structures and tools to do it successfully. Thanks for being a reader!
I’ve never been in a management position with the responsibility to review staff. But as the staff being reviewed I’d have to say that I agree with paying for performance. Firstly, nobody (or at least me) likes doing a better job and be paid the same or not much more than an underperforming colleague. Conversely, and perhaps oddly, neither do I like being given the same rating as a colleague I know is heads and shoulders beyond me. The latter is primarily because it is evidence that my management and employer has no idea what good performance looks like, and I don’t want to work for such people.
That said, I’ve had a pretty good review session in my new job this year – I finally found the discussion useful and rewarding. It makes such a difference when the management owns the process.