Is It Time to Scrap the Annual Review?

By Kevin Lawrence

Having recently read the report about Accenture scrapping its annual  performance review process and replacing it with something far more ‘fluid,' I find myself reaching for my skeptic’s hat.

I am not a fan of the ‘annual review’ but am skeptical as to the underlying drivers for this change in the large corporate sector.

One of the advantages of the performance review (if conducted well) has been the practice of managers having career and performance discussions with their team members, using what should be consistently and objectively applied measures.

What has always been an issue is the antipathy toward the amount of paperwork and preparation needed to undertake this significant bureaucratic task (and attitudes toward it) – especially in organizations where people seem to believe a manager can effectively manage more than eight direct reports. Historically in the corporate world (and the private sector) unless something has gone wrong and been immediately ‘managed by exception,' discussions about performance tend to be few and far between -- hence part of the rationale for some sort of annual review cycle, often with six monthly interim reviews, with which to make judgements about performance, contribution capability levels, skills shortages, potential, etcetera.

The rationale for the change at Accenture and other large corporates has been well stated, though I can’t help but wonder if the change will add any real value, for a number of reasons.

Communication issues

Taking away the annual and/or six monthly reviews will not resolve the underlying issue: A lot of managers seem to find it incredibly difficult to integrate iterative and objective, effective discussions about performance into their everyday dialogue with team members (regardless of seniority or professional status).

Yes, the paperwork and form-filling disappears (to a large extent) – but what we are left with is a group of managers who already find it challenging to talk honestly and objectively about individual contribution on a regular basis, being asked to do so ... on potentially an even more regular basis.

Is it really about resource?

I wonder if an underlying motivation (sure to be denied) in larger organizations for adopting this model is the freeing up of time and resource, not enhancing the performance-management and people-development process. In an organization of 1,000 people, where all employees have an annual and interim review, the time saving (if a rigorous process is utilized and assuming a 43-hour week) will be conservatively between 8,000 and 9,500 hours – that’s between 186 and 221 weeks of labor saving. In a company of 330,000 people, with just one review per annum, that must be in the region of 46,000 working weeks -- the equivalent of approximately 1,000 people. Sure, there will be some time spent on the new process, but I would imagine very little compared with the traditional one.

(I hope I’m wrong, and that this is a significant breakthrough in workplace management practices, rather than a way to free up resources, and because ‘we just can’t get the current process right’!  Only time will tell.)

Make people development a meaningful objective for managers

If I am correct, perhaps the issue is deeper than managers’ willingness or ability to have effective real-time (or the annual retrospective) performance management conversations with the people they have a duty of care for (for whatever reason).  That, seems to put the full onus on the manager and can easily give way to a ‘pull your socks up’ culture in which performance management is highly subjective and, in value terms, meaningless.

Managers, like most employees, tend to focus on what they are being measured against and/or rewarded for. Few organizations genuinely evaluate and focus on managers’ effectiveness in developing the talents of their people. This is far more than just counting the number of training hours that a manager has authorized and well beyond whether a manager has successfully groomed a successor.

It is about giving managers a meaningful objective that focuses their effort on facilitating the growth of the capabilities of all their people; and, making that objective just as important as ‘hitting the numbers.'  Unless organizations are serious about that, they can’t realistically expect their managers to give serious time, effort and energy to forward-looking performance management practices that are focused on growth rather than corrective performance management -- which is focused on actions in the ‘rear-view mirror.’ If senior management is not serious about making this change, then perhaps all those self-congratulatory “people are our most important asset” statements in annual reports should be erased.

Image credit: Flickr/Images Money

Kevin Lawrence is Managing Director at the Odyssey Group. He specializes in leadership and management development, change, executive team development and organizational development strategy.