Strategy & LeadershipBusiness TransformationWhy it’s time to move on from the annual performance review

Why it’s time to move on from the annual performance review

Change is not new. Progress has always been with us. Advancement is a given. But what digital has brought to just about every sector, industry and business is a transformed scale, scope and pace of change. The required organisational response is not only wide, but deep and fundamental, and that is especially true when it comes to performance management.

In response to relentless, accelerating change, a new heightened level of organisational agility is not only desirable, but critical to survival. Digital technologies have shifted power towards individuals and small teams within companies who can create dramatic change through the origination and execution of exceptional ideas. The difference between the great and the merely good in digital talent increasingly makes the difference between the outstanding and the average in business. And yet, many of the ways in which we manage the performance of our staff are stuck in a bygone era.

Small wonder then, that a series of high profile businesses including Microsoft, Adobe, Accenture and Deloitte have announced that they have moved on from the annual performance review as a core performance management practice. The key reason stated by each of these organisations for this move is that reviewing what staff did a year ago is simply too slow in the context of the heightened pace of change in which just about every company operates.

Performance management therefore needs to be based on more regular, more informal feedback and reviews which can allow for a more iterative approach, smaller course corrections, and more responsive behaviour change by employees. Companies such as Deloitte believe that making this change enables a greater return on the considerable investment of management time that goes into the process. They famously found that two million management hours annually were being spent assessing staff performance and discussing the outputs of the process. Yet a separate public survey that they initiated found that a majority of executives (58%) did not believe that the current review process aided either employee engagement or high performance.

Deloitte have instead moved to a system that involves regularly asking team leaders about their future actions related to particular team members, helping to ensure consistency and reduce the idiosyncratic nature of many review processes. Responses are focused around four questions that look to the future rather than the past:

  1. Given what I know of this person’s performance, and if it were my money, I would award this person the highest possible compensation increase and bonus(measures performance, leaders can answer based on a five point scale from ‘strongly agree’ to ‘strongly disagree’)
  2. Given what I know of this person’s performance, I would always want him or her on my team(measures capability to work productively with others, uses the same five point scale)
  3. This person is at risk for low performance (identifies problems, simple yes or no answer)
  4. This person is ready for promotion today(measures potential, simple yes or no again)

When combined with what they call frequent ‘check-ins’, employee work and productive behavior can be better supported, ensuring greater clarity, alignment and also employee engagement (Deloitte have noted a correlation between employee engagement and how frequently check-ins are run).

A number of other high profile businesses including Google, LinkedIn, Oracle, Twitter and The Guardian have moved to a system of OKRs, or Objectives and Key Results. This methodology for connecting company, team and individual goals and measurable results was originally introduced at Intel in the 1970s. John Doerr, an Intel executive and Google board member introduced the framework to Google early in the company’s journey as a way of helping them align objectives and direction across the business as they scaled rapidly. The system involves setting quarterly measurable, definitive objectives at a company, team and individual level, and then supporting those objectives with quantifiable key results, against which performance is measured. OKRs are often made transparent (at Google for example, everyone’s OKRs from Larry Page the CEO down are available to see on the internal directory) but provide a clear directional focus and expectations, ensure alignment at every level, and a high level of awareness of what others priorities are. This brings greater empathy and understanding for individual or team priorities, and giving focus to how an individual might make their own priorities align with someone else’s in order to get stuff done.

In our book, we make the case for why, in response to rapidly changing operating environments, we need to be far more agile and adaptive in the way that organisations of all kinds work. A key part of this is how we manage employee and team performance. Frequent, informal feedback, and structured but tailored approaches that are future-facing are critical to enabling this change.

For more on the ‘how’ of digital transformation, and to understand how to ensure your organization is fit-for-purpose for the digital-empwored world, read Neil’s book, Building the Agile Business Through Digital Transformation (Kogan Page, April 2017).


Neil Perkin Biography:

Neil is a renowned blogger, writer and the founder of Only Dead Fish, a digital and media consultancy that specialises in applying strategic understanding of digital and emerging media technologies to help businesses optimise their effectiveness within the new, networked communications environment.

Neil is the author of the upcoming book on organisational agility and digital transformation, ‘Building The Agile Business’ (Kogan Page, April 2017). He is a regular keynote speaker across Europe on digital transformation and digital strategy, and has been named by BIMA (British Interactive Media Association) as one of the most influential people in the UK digital industry for two years in a row. He curates the global quarterly series of Firestarters thought leadership events on behalf of Google, is a keynote speaker on the Google Squared programme and has worked with market-leading global businesses including The Financial Times, BBC, Warner Bros, the UK Government, Unilever and YouTube. He is an associate of The Futures Agency, a collaboration of some of the world’s leading forward thinkers and futurists, and is also the co-founder of the Fraggl Twitter curation app.

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