Three questions to answer before cancelling your performance review

How, when and why did the annual appraisal become the gold standard for improving employee performance? How, when and why could you ditch it for something a little more 21st century?

After decades of triumph, Performance Review's dominance has started to wane. A few years ago, the nimble newcomer Ongoing Feedback, entered the ring.

Companies around the world are now grappling with the question: "Who do we back?"

Performance Review (let's call it "PR") was a household name. He still is. Sure, he's getting old, kind of forgetful, a little slow, but he's been part of the family for so long that it's hard to turf him out.

He is, after all, predictable - you know what you're getting. He's not everyone's cup of tea but he's seriously ingrained into family tradition.

(In my previous roles at J.P. Morgan and Goldman Sachs, he seemed to have an invincibility to suggest he was drinking from the fountain of youth.)

Besides, how can we be sure that this new rival of his will carry the crowd for the next 20+ years?

Ongoing Feedback ("OF") is young, she's glamorous. She promises a lot. But she's hard work.

Will she still be there to greet your parents next Christmas? Or will she disappear into the sunset, leaving nothing but tears and shame from all the people you tried to convince that "she's the one!".

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My mum never liked conflict. I used to get grounded for fighting. She'd say, "why can't you two just get along?".

So, as a nod of the cap to my amazing mother, I'm going to pose and answer this question: Can PR and OF get along? Do you really need to ditch PR? Or do you just need to allocate him some different responsibilities to cater for his lagging popularity?

The answer lies in these three questions:
1. What are you trying to achieve with your performance review?
2. How much performance feedback is too much?
3. How should you deliver performance feedback to employees?

Before we delve into these questions, we first need to take stock of how we got into this situation.

Prelude: How did we get here?

Humans haven't really changed in 30,000 years.

But, these things happened in the last 20 years:

- Broadband internet became widely available
- Social media became a thing (a massive thing)
- Cloud computing became the modus operandi
- Millennials became the largest part of the workforce
- A global financial crisis changed the career outlook and expectations of Millennials
- We all started carrying a smartphone in our pockets
- Baby boomers started retiring

And, the distance between any two people has been severely shortened thanks to cheap airfares and even cheaper data.

Instead of lifelong fulfilment from a steady job, most people seek instant gratification from their beautifully filtered new profile picture.

All of a sudden, employees don't want to wait 12 months to ask their teammates, How am i doing? or Where am i going?

A number of employers found themselves in a precarious position: fire their annual performance review or get fired by their employees.

And so the dominos started to fall.

First was Accenture, publicly announcing in 2016 that they sacked their annual appraisal.

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Since then, there has been a slow migration of large corporates across the tumultuous performance plains toward the promised land of year-round employee learning and development.

Onlookers (PR's pals) stand idly by, ready to watch them falter and pick up the pieces.

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Is it a real trend though? The data suggests there are strong tailwinds:

- 9 out of 10 managers are dissatisfied with the way their company conducts performance reviews (Corporate Executive Board, 2015)
- Only 1 in 5 people found their last performance review to be "very valuable"
(Howamigoing, 2018)
- 56% of people experienced anxiety as a result of their last appraisal
(Howamigoing, 2018)
- 40% of people want to quit after their appraisal, purely because of that appraisal (TimesJobs survey, 2015)
- 20% of people have cried following a performance review (Adobe survey of 1,500 US employees in 2016)

But the reality is that PR remains the go-to-guy for critical employee feedback.

In one survey of almost 100 Heads of HR and C-Suite executives conducted by Howamigoing in the UK:

- 40% of companies still conduct an annual feedback cycle
- 18% conduct a semi-annual feedback cycle
- 17% provide employees with no formal feedback throughout the year

It seems that only the boldest, most forward thinking of management teams have hired OF (and often only as a part-time consultant).

So here we are. A lot of pain and frustration but not much action.

This brings us to critical question #1 in deciding whether you should ditch your performance review.

Question 1: What are you trying to achieve with your performance review?

Why did your company start using performance reviews in the first place? The most common answers are:

1. To decide remuneration
2. To drive business performance
3. To drive individual performance
4. Because everyone else was doing it

Let's take these one by one (except #4).

Firstly, if the objective of your performance review is to determine pay, then you are misleading employees on a grand scale and stunting their growth.

As this article explains further:

- Pay is based on market forces, budgets and interpersonal politics, not someone's performance
- Linking pay to performance feedback kills personal development and teamwork

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For knowledge-based roles, you simply cannot correlate someone's day-to-day contributions with (a) what is available to pay them as a rise or bonus and (b) the subjective decision by management about what to actually pay them.

If you want to distribute salary rises or bonuses in a transparent and equitable way that doesn't pit employees against each other, check out chapter 9 in Samuel A. Culbert's book, Get Rid Of The Performance Review.

This brings us onto driving business performance as motivation for implementing performance reviews.

In the 1990s, sociologists James Baron and Michael Hannan analysed the founding cultures of over 200 Silicon Valley start-ups.

They fit broadly into 3 buckets:

1. The "star model" aka hire the brightest people
2. The "professional model" aka build the group around specific skills
3. The "commitment model" aka develop a group with shared values and emotional bonds

When the tech-bubble burst in the 2000s, start-ups founded on the commitment model survived at vastly higher rates and were three times more likely to achieve an initial public offering.

Having the most intelligent people in the company didn't ensure success.

Having people who can bond together to form a community of intelligence is much more likely to drive business performance.

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Is your performance review structured in a way that brings individuals together as a group with shared values and commitment? Or does it isolate and celebrate only the top 5% of employees?

If it's the latter, you'll want to rethink it.

When it comes to driving individual performance, the answer can be a little counterintuitive to some people.

It turns out that to get the best performance out of someone, it's rarely about the money.

It's about creating an environment of vulnerability.

Daniel Coyle elaborates on this beautifully in The Culture Code.

When a team has a culture that makes its OK with being vulnerable (admitting to mistakes and confessing to personal shortcomings), team members can relax and put their brains toward higher-level creative thinking.

When team members feel comfortable in their skin, the fear of failure fades away and they are compelled to try their hardest.

But being vulnerable takes practice. And a once-per-year performance review is rarely the right practice ground, particularly if one's salary or bonus is at stake.

It takes daily practice, constant sending of "belonging cues" as Daniel puts it.

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And being in this environment of continuous feedback is increasingly attractive, not just for an employee, but for the business, according to some recent studies:

- 84% of Millennials want more frequent performance conversations with their manager (TriNet + Wakefield Research, 2015)
- 2 out of 3 people prefer to receive feedback ahead of their appraisal
(Howamigoing survey of 1,200 UK employees, 2018)
- 79% of employees expect immediate feedback on their performance (Achievers Survey, March 2017)

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Howamigoing data (2018)

This brings us to the second key question in the battle of PR vs OF.

Question 2: How much performance feedback is too much?

Have you ever been deprived of feedback?

Have you ever had too many people telling you too often all the ways you can improve?

At Bridgewater Capital, the largest hedge fund in the world, CEO Ray Dalio permits (encourages) every employee to rate other employees during each meeting using a custom-built app installed on all company iPads. The results, a scale of 1-10, are shown on a heat map for all to see.

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CEO Ray Dalio, column 1, was rated 3/10 by 24-year old graduate Jen, row 1, after he delivered a talk on the impacts a Trump presidency could have on the US.

This culture of radical transparency and constant feedback, as Ray puts it, has been critical to ensuring everyone has a voice and that everyone critically contrasts their opinions vs other people's opinions.

This is a very unique approach though and while it's been successful for Bridgewater Capital, it would be difficult to layer on top of most other established businesses.

For everyone else, it's useful to remember that there are generally three types of feedback, according to Sheila Heen and Douglas Stone in their book Thanks for the Feedback.

Each are important and serve their own unique human need throughout the year:

Praise - "Thanks!" or "Great job!" - administer every day as required by your manners
Advice
- "Here's how to do it better" - at least every few weeks
Evaluation
- "Here's where you stand" - once or twice per year

Evaluation is the hardest type of feedback to take.

And unfortunately for poor old PR, he is the poster boy of Evaluation, which means we avoid him like a bad smell.

But, as much as it can hurt/ stink, we do need evaluating.

A basic human need is to belong to the tribe, which in today's society translates to knowing where you stand with your colleagues.

In fact, we get evaluated all the time.

When you've been dating your partner for 6 months and tell her for the first time, "I love you", that's an evaluation.

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When you sit an exam after 6 months of study and receive 77/100, that's an evaluation.

Workplace evaluations get a bad name because they don't deliver progress:

1. They're often the only form of feedback you get throughout the year, and
2. They're backward looking rather than future-focused

Our brains are wired to progress, to learn. So much so that, when we learn something new or improve ourselves in a particular way, we get a small shot of dopamine.

That is, getting positive or constructive feedback can feel like a drug.

How often are your employees getting their hit?

The tricky thing is, while most of us value feedback and want more of it, we don't ask for it.

It's a bit like eating our greens. We know it's good for us but we just don't do it.

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But really, when it comes to the right frequency of feedback, the only way to know what's best for your company is to actually ask employees what they want.

If you've recently conducted a pulse survey and the majority of your employees are content with once-per-year feedback, then maybe PR just needs a bath and some new clothes

But, our surveys tells us that most employees prefer:

- at least two structured but short 360 feedback cycles per year, along with
- at least bi-weekly manager check-ins, and
- a way to confidentially and easily gather ad-hoc feedback from the team e.g. after completing a project, plus
- a way to give upward anonymous feedback to management about cultural or business initiatives.

We always conduct these surveys within the first couple of months of onboarding a new client, so that we fully understand the feedback demographic of a company's employees. It also allows for personalisation of performance plans based on individual preferences.

But there's still one thing missing in the employee performance puzzle: to deliver feedback face to face in the moment, or face to face but later on, or via email/ app?

Question 3: How should performance feedback be delivered?

As Sam Culbert will tell you in his book Good People Bad Managers, the best feedback:

1. Comes at a time of the employee's choosing (i.e. solicited), and
2. Comes from a person that the employee trusts, respects and admires (i.e. a mentor figure)

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Sam is a friend of mine and I'm a big proponent of this philosophy. After all, feedback is designed to help the recipient, so it should be received when it suits the recipient, not when it suits the giver.

But while this is an easy concept to grasp, it can be hard to put into practice.

Why?

Because if you wait until someone is brave enough to ask for feedback, then you may be waiting for a while. And because it's hard to know when someone is mentally open to receiving critical feedback.

I've certainly been in the situation where nobody gave me critical feedback for over 6 months, by which time some bad habits and perceptions had formed that were hard to overturn.

Requesting feedback on our work requires us to be vulnerable and open ourselves up to criticism. And while we know we should be doing this periodically, most of us don't.

Remember the "eating your greens" analogy above?

Compounding this situation is the fact that so many of us are bad at delivering feedback due to lack of training and cultural biases.

This article explores how our inbuilt, subconscious social norms from childhood are terrible preparation for giving feedback to others.

We feel like we're being objective and impartial when describing another person's actions and behaviours. The truth is that all performance feedback is subjective. We all see the world through our unique lens and recount past events via our personal storytelling playbook.

We also feel that we should focus on the negative, the areas for improvement when giving feedback to others.

However, there is a large body of research suggesting that strengths-based feedback delivers greater employee performance than focusing on someone’s weaknesses.

See for example Aguinis, Gottfredson and Joo (2012), Cohen et al (2014).

This is largely due to:

- our inability to materially improve in areas that we are not inherently strong at, and
- when focusing on our weaknesses, our unique strengths get less air time and our confidence suffers.

So what's the solution?

Well, we should never do away with face-to-face conversions. That's how the most trusting human relationships are formed.

BUT, and this is a big but, so many of us find it easier to be open, honest and constructive when we give our thoughts electronically, anonymously.

Why?

Because when you combine our deeply ingrained fight-or-flight tendencies with current digital communication preferences, typing is safer and requires less emotional energy than talking.

It's human nature to choose the path of least resistance.

Being able to type critical feedback gives people the freedom to choose their words more carefully and being able to send this feedback anonymously means we are less concerned about hurting the relationship.

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Both of these allow us to provide richer, more constructive feedback.

It's sad but it's true and I wish anyone trying to overturn this inertia the best of luck.

So while face-to-face interactions are best for building relationships, they're terrible for getting honest feedback out of someone.

If you want the truth, the whole truth and nothing but the truth from your colleagues - then gather anonymous 360 feedback.

Once you've got this feedback, schedule a 1:1 with a trusted manager or mentor. Tell them what the feedback told you about yourself and ask for their guidance on what you may consider doing differently going forward.

Repeat this process every few months. That's one of the most powerful performance programmes a person can have.

Your job as manager or HR Director is to foster a culture that promotes this behaviour.

To sum it all up...

A once-per-year feedback discussion that determines salary or bonus seldom delivers lasting performance and loyalty from employees.

But, it's important to have some structure in a performance process. It's inherently uncomfortable for people to ask their teammates for developmental feedback. If left to their own devices, many employees simply won't take the initiative to have performance conversations with their team.

PR can do less damage when he leaves his wallet at home. So instead of using him as a backward-looking evaluation to determine who gets the money, treat the time with him as a career planning session. A moment with an old soldier who will listen to his mentees with a smile and offer bespoke personal development advice if asked.

Treat the time with PR as a look back at all the dates with OF throughout the year. Focus on the employee's strengths, celebrate the times they fell and capitalise on the lessons learnt.

Convert your performance review from a one-sided employee evaluation to a time where employee and manager are jointly held accountable for the development of the employee.

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Just like any good student and teacher relationship should be.

Do you remember school and the joys of learning from those with more experience? That's what a performance programme should feel like.