Lucy Adams
September 19, 2023
Reading time: 8 minutes
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It’s costly and takes a huge amount of time and over 80% of us don’t believe it helps with our performance or find it motivating. And yet we still do it. Every single year. The annual performance review. In HR we have been told for years that if you want managers to take care of performance, then they have to:

  • Set annual objectives for their team – that cascade from the senior team and are ideally SMART
  • Review these objectives once a year and give each team member a rating out of five. Or sometimes a statement like ‘meets expectations’.

Yet despite us telling managers that this will lead to higher performance and despite us trying numerous wheezes to get them to do it well; like automating it, putting it all on one page or providing a guided distribution of ratings that they have to comply with – we are still left with the awful truth that traditional performance reviews don’t work. They simply don’t drive better performance or higher motivation.

So why doesn’t traditional performance management work? Here, in our view, are the top four reasons:

Annual objectives can’t keep pace with the disrupted world we live in

The idea that a target we set in January will be still relevant by December is risky at best. In addition, the idea that every person’s objectives can be neatly aligned with the senior team’s is just not rational. Objectives that do work tend to be team based and refreshed by the team on a regular basis.

Feedback that is only given in a huge lump once a year is pretty pointless

We wouldn’t do this with our kids would we? Imagine if our child was doing something that deserved our approval or censure … would we make a note of it and raise it with them three months later? Of course not! Feedback that works is given at the time when the behaviour is fresh in the person’s mind. The way we give feedback too is not conducive to changing someone’s performance. We sit people down and give them feedback in an incredibly parental way – which of course immediately puts someone on the defensive. Think about an appraisal that you have had in your life. Think about all of the appraisals you’ve had ….. and the amount of discomfort you felt. This is because your brain is sensing threats – lots of them. You can’t help it. It’s a totally natural response. The Neuro-leadership Institute has shown that the words “I’m going to give you some feedback” has the exact same effect on the brain as a reaction to walking down a dark alley at midnight and hearing someone running up behind you – or the threat of physical pain. This means that all of our brain resources are rushing to avoid or resist the threat. Conversely, the part of our brain that encourages engagement, openness, curiosity and problem solving – all the reactions you want from an employee in an appraisal –  shuts down. The best forms of feedback are through frequent check-ins and ideally owned and driven by the employee themselves.

Performance ratings are ‘bad data

Our ability to rate another human being consistently and objectively is fundamentally flawed – not because we are bad managers – but because we are human. It’s worth checking out the work of Marcus Buckingham on this – he’s got a great 12-minute video on why performance ratings are not reliable data. For example, our ratings tend to be based on what we can remember from the last few weeks – so called ‘recency syndrome’ – rather than a whole year.

Traditional performance management doesn’t improve performance!

But more than anything, the problem with ratings is that they don’t drive better performance! If the conversation is going to result in a grade, we want to show ourselves at our best, to cover up any failings that might downgrade us. But if we want performance improvement, then we need the employee to be open and curious and driving a conversation about how they can improve and what they’ve learned from things that haven’t quite worked. Ratings and grades just get in the way of better performance.

Annual objectives, once a year feedback and a rating. These traditional performance management tools belong to another era. They are based around the fact that we don’t trust managers to manage.  And it’s time for something different; employee-owned discussions, frequent check-ins and absolutely no ratings!

If you’d like to find out how to change your approach to performance management – check out our FREE Complete Guide to Changing Performance Management.

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