The dreaded annual performance review is a relic of the industrial age. To manage people in times of fast change you need to do this.
Anyone who has had the privilege to lead has also had the responsibility of the dreaded annual performance review.
We’ve all been through them, but I’ve yet to meet anyone who actually looks forward to a performance review, anymore than they would a root canal. Not only is it stressful for both parties involved but it’s also horribly ineffective. According to the Society for Human Resource Management, and as reported in Slate, “95% of employees are dissatisfied with their company’s appraisal process. What’s more, 90 percent don’t believe the process provides accurate information.”
Worse yet, an Adobe study found that performance reviews have no effect on how they do their job.
“We’ve Always Done It That Way,” Just Isn’t Reason Enough
So, why do we keep doing them? In large part because we’ve always done them. We’ve been conditioned by 20th Century corporate culture to accept them as the norm. And, to be blunt, most people are just shamed into doing them. “What? You don’t do yearly performance reviews? Are you afraid to?”
And so we’ve muddled our way through them as best we could, all the while knowing something just wasn’t quite right about the awkward and seemingly ineffective process.
However, there’s nothing sacred and immutable about performance reviews. They are a relatively recent phenomenon, having their roots in early and mid 20th Century Industrial era thinking. Elton Mayo, a psychologist and organizational theorists, often considered the father of HR theory, established a model for employee engagement that was an alternative to Frederick Winslow Taylor’s rigid scientific management approach. It was a positive change at the time and it started the trend towards more human-centered performance-based management.
“Using feedback on performance to course correct once a year, or even twice a year, is akin to trying to navigate a minefield by reviewing your performance after you’ve crossed it…only on this minefield the landmines are shifting underground as you walk through them!”
Then, in the 1950s, the US government’s Performance Rating Act which used the three categories of Outstanding, Satisfactory and Unsatisfactory, along with the Incentive Awards Act, which provided cash bonuses and incentives to government employees, both further cemented the idea of performance-based reviews.
It wasn’t until 1970, however, that Aubrey Daniels, considered by many to the the father of performance management, coined the term “performance management.”
Since then we’ve accepted the annual performances review as gospel.
There’s no doubt that performance reviews were a huge step towards not just evaluating employees but also soliciting their feedback. They were an effort to look at employees as people with motivations, goals, and purpose, rather than unfeeling cogs in the industrial machine.
But, as with most industrial era models they were built primarily for scale in large organizations that were rapidly growing. Their rigor, checklists, metrics, and one or twice yearly application was never particularly good, especially for smaller organizations, but we accepted them as just part of the corporate tedium.
Things have changed.
The Real-time 360
The rate of progress, market and technological change have made a yearly review nonsense. Using feedback on performance to course correct once a year, or even twice a year, is akin to trying to navigate a minefield by reviewing your performance after you’ve crossed it. It’s not entirely ineffective for some, but there will be far more casualties among those who need feedback in the moment. In fact, if you want to bring that analogy up to date; on this minefield the landmines are shifting underground as you walk through them!
But how can you possibly deliver feedback on a daily basis to everyone that reports to you? Especially in a small or medium sized company where time is already at a premium.
Yet, there is one approach that replaces the performance review and aligns perfectly with the pace of change in today’s organizations; the Real-time 360 Review
Just as the name implies, a 360 is intended to provided 360 degrees (a full circle) of feedback from a broad set of perspectives and vantage points. I will warn you that it is a radically different approach. And this is also not the sort of 360 evaluation that only happens once. Those are helpful but only barely, as the still show just a snapshot in time.
If you have not been through a 360 it is nothing like a traditional performance review. Much of what you get is raw and unfiltered feedback, which you will be tempted to become instantly and intensely defensive about. That’s why you will have to invest heavily in developing an understanding of how it works, committing to it, and developing a culture that supports it.
The good news is that once you have a real-time 360 in place your team members will have an ongoing instant assessment of their performance in a way that puts any other sort of review process to shame.
How It Works
Rather than have one person determine how well someone has performed once or twice a year, a real-time 360 relies on the perspectives of everyone that a person works and interacts with on an ongoing basis.
This may sound tedious at first, but the reality is that once set up it is infinitely simpler and more effective than any form of periodic performance management.
There are many apps available to help you put one of these in place. I’m not even going to bother listing them here. If you do a simple Google search of “real-time 360 review” you will come up with dozens of references of providers along with examples of how its being done at major companies such as Goldman Sachs.
A 360 evaluation consists of a standard set of criteria, questions, and ratings that the persons will be measured against. These can vary widely, bit most often will focus on several factors; effectiveness of interactions and communication with others, reliability and consistency, ability to achieve stated goals, and overall performance.
What is radically different is that you can define the universe of people that will be reviewing other people. In a small company (under 50 people) you could set this up so that everyone is literally evaluating everyone else on an ongoing basis.
The way I’ve used 360 reviews in the past is to do one broad-based 360 in which every employee within the company will rate all other employees. (If it’s a larger company you can break it down into departments/operating units/teams. Twenty to no more than 50 people is good since that provides enough data without being a burden.) That baseline is then used to add to incrementally on a daily basis.
Not everyone will rate everyone else daily. That would be absurd! Instead, everyone has the ability to rate anyone else whenever they desire. Over time the regular feedback creates a trending function that shows how certain behaviors and actions correlate to feedback.
You’re likely thinking, “Sure, who has the time?” But the beauty of it is that since people want feedback they will provide it as a quid-pro-quo. And if set up correctly the time spent should be measurable in seconds and minutes, definitely not hours.
A few things are critical if you are gong to do this:
- Have qualified people to review the initial feedback in the baseline 360 with each employee. As I said earlier, seeing yourself in this sort of unfiltered light can be harsh and difficult to rationalize.
- Focus on the value of creating a culture that regularly promotes the value of the real-time 360.
- Anonymize the responses. There’s much debate over this point. Some people feel that anonymizing encourages drive-by criticism. My experience has been that some of that will show up, but if the 360 is done right then overly negative feedback will be drowned out by more accurate feedback from many more reviewers.
- Review up as well as down. The 360 is one of best tools I’ve ever come across for the growth and development of leadership skills. Leaders rarely get accurate and unfiltered reviews from those who they lead. The 360 is nothing short of eye-popping for leaders. This is who you are perceived to be, deal with it!
- Lastly, recognize and incentivize people for participating in the process. These are not financial incentives but rather acknowledgments for being engaged in the process and supporting it. Be sure to do this in a way that maintains anonymity in order to preserve the integrity of the 360.
- Mandate participation. I know 360s irk some people who just do not want to participate, either because they don’t like seeing how they are perceived or can’t be bothered to help others grow. My take on that is simple; I don’t want someone on my team that can’t handle the former or who cannot invest in the latter.
By the way, none of this should obviate the need for leaders and managers to periodically sit down and talk with employees about performance issues, good or bad. People need to be recognized for their efforts and contributions as well as made aware of ways in which they may fall short. Also, don’t be too quick to dismiss this approach for more manually our mechanically oriented tasks. Unless someone is working in a complete vacuum an awareness of they way they and their performance is perceived is critical in being effective and learning.
360 reviews definitely have their share of haters who feel they are a waste of time. Most of those detractors focus on the traditional “once-and-done” 360 review rather than the real-time method I’m describing. All I can tell you is that in my experience real-time 360 reviews offer unparalleled insight for personal awareness and growth.
The bottom line is that traversing the minefield that is your market can’t be done using the same old and tired tools of the past. The 360 will create a culture that is constantly learning and growing from the shifting obstacles and opportunities that your team needs to navigate in order to learn, grow, and succeed.
This article was originally published on Inc.
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Tom Koulopoulos is the author of 10 books and founder of the Delphi Group, a 25-year-old Boston-based think tank and a past Inc. 500 company that focuses on innovation and the future of business. He tweets from @tkspeaks.