The performance review process is undergoing a revolution. One by one, mega-corporations like GE, Adobe, Accenture, Microsoft, and Netflix are announcing they’re scrapping their annual rankings- or ratings-based performance management systems and replacing them with real-time feedback systems. The reason is clear: Real-time feedback is a better fit for today’s fast-paced business environment and a younger, tech-savvy generation of workers.
Out with the archaic system
The traditional annual or semi-annual employee performance review system is the model that most businesses still use to assess performance, justify compensation increases, and provide feedback. In a technology-driven, constantly changing corporate environment, the often tedious, once-a-year evaluations—that risk inspiring employee fear more than improved performance—are already in danger of becoming archaic.
The traditional rank- and ratings-based system carries a lot of potential negatives, including causing high levels of employee frustration, pitting employees against each other, and fostering disengagement. In the context of neuroscience, the disengagement emanates from the employee’s brain responding negatively to being compared to others instead of being assessed as an individual. Once disengaged, feedback falls on deaf ears.
Annual or semi-annual evaluations can also be ineffective when the focus tilts too heavily toward things said and done many months ago. Millennials want real-time feedback as a means of achieving high performance levels in their current environment. As the first generation of workers to grow up with instant communication, they expect more frequent evaluations and fast, relevant feedback.
Reluctance to let go of the past
There has been a reluctance to let go of the traditional employee performance review process. For all its faults, it’s a well-embedded process, and alternatives are untested by time. Only 10 percent of Fortune 500 companies have moved away from annual ratings, per the Institute for Corporate Productivity. However, when GE decided to scrap performance reviews, people took notice because the company had one of the most rigid review systems for one of the world’s largest workforces.
In the old GE system, employees were reviewed annually, ranked against peers, and the bottom percentage fired. The new system works very differently. GE is rolling out a process in which managers and direct reports hold regular and informal “touchpoints” for reviewing and revising priorities based on customer needs, and providing immediate feedback following assignments. Regular, personalized feedback is delivered via an app to 307,000 employees.
Deloitte conducted a public survey on ranking- and ratings-based performance management systems, and the results were dismal. Only 8 percent of respondents believe their performance management system drives high value levels. Deloitte concluded from the responses that traditional performance management systems actually damage employee engagement and alienate high performers.
In with the new real-time feedback system
With such large and well-known companies realizing it’s more effective to regularly provide employee feedback because one size does not fit all, more widespread adoption seems likely to follow. Real-time feedback can make your employees feel recognized and appreciated for the work they’re doing now, not 12 months ago. It can also improve the quality of feedback because it concerns current performance, enabling employee behavior adjustments that can improve productivity immediately.
Real-time feedback also creates a valuable and uplifting two-way dialogue, rather than a top-down assessment. Your employees get unique feedback without being boxed in by a set of questions, and high performers can get the tools needed to succeed now. Real-time feedback turns the employee performance review into ongoing coaching. There are various forms of real-time feedback. They include weekly one-on-one meetings with managers, routine catch-up sessions via email or an intranet communication program, engagement surveys, feedback apps, and recognition programs.
Real-time feedback programs can be successful in building engagement within the broader business context because they provide ongoing peer and management feedback. The showdown between real-time feedback and annual reviews has arrived, and real-time feedback is off to a fast start. To learn more about how real-time feedback is taking the spotlight, check out our webinar recording, "Real-Time Feedback and Recognition: The Key to Driving Sustainable Engagement."