Have you heard? Annual performance reviews have been rated ‘needs improvement’.
From CEOs to employees, and from HBR to Fast Company to Deloitte University Press, there is an overwhelming consensus that current approaches to performance management – anchored around the dreaded annual review – are broadly ineffective. According to a Deloitte University Press report, less than 50% of CEOs believed that their performance management approach helped drive employee engagement or business results. Further, less than 10% of HR leaders believe that annual performance reviews result in accurate information, and less than 4% of employees feel that it is the best way to motivate and engage them.
In response to this disappointing data, companies are moving quickly. Most large companies are actively experimenting with performance management systems, and some have eliminated annual reviews entirely. The challenge is that while the data is clear on what doesn’t work, there is no clear consensus on what does.
The inevitable period of experimentation and transition to come will challenge managers – as many of them will be asked to ‘fly the plane while its being built’. Arming them with the skills to thrive during this period of transition will be vital.