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The State of the Performance Review

performance review

Does anyone love performance reviews? Certainly not the 34 percent of Millennials who say they have been driven to tears during at least one. Nearly 20 percent of women and 25 percent of men of all ages have cried because of a performance review (you read that right: even more men than women). Performance reviews have been proven to dull brain activity (no joke) and generate a “fight or flight” response that impairs good judgment.

Is it any wonder so many companies have vowed to nix performance reviews altogether? The number of Fortune 1000 companies eliminating the annual review increased to 12 percent in 2015 from 1 percent back in 2011. What brought these companies to this point and what lessons did they learn along the way?

  • In 2012, Adobe became a trailblazer in ditching the traditional performance review by rolling out a check-in process of ongoing dialogue between managers and employees. Written reviews aren’t required. Adobe representatives tell Forbes the change saves the company 100,000 manager hours a year, and voluntary attrition has steadily declined since rolling it out.
  • Microsoft and General Electric have famously moved away from their traditional stack-ranking (also called rank-and-yank) tactics of terminating the bottom 10 percent or so of low performers during regular reviews. Not only has it completely changed the culture of the organizations, but doing away with the brutal performance review tactic could be saving them plenty in legal fees as the practice gets questioned more and more.
  • Apparel company Patagonia replaced formal reviews with quarterly check-ins two years ago, telling Deloitte, “The new [performance management] process has generated better financial performance, improved individual performance, and strengthened engagement.”
  • Amazon is currently in the process of changing and simplifying its existing employee ratings program as part of changes in its broader review process. In the past, the company has been under fire for its own stack-rank/rank-and-yank system. Stay tuned for an update on their progress.

Performance management systems have been found to be misleading, cumbersome and complex. But ditching them altogether can be a big mistake. As the Corporate Executive Board (CEB) found out, employee performance drops by around 10 percent when performance ratings are removed. Why? There is an assumption managers will automatically replace performance reviews with more informal feedback, employee engagement activities and other best practices.

But they don’t.

In fact, CEB found less than 1 in 20 managers can effectively manage employees without ratings. That’s why those who succeed, like the companies listed above, still have some sort of process in place to keep managers accountable.

According to employee engagement company TinyPulse, when replacing a tired, old performance review process, focus on a system that:

  • Reinforces good behavior right away.
  • Maintains a way for employees to have private conversations with managers.
  • Allows managers to coach and offer feedback in a way that doesn’t take up valuable time.
  • Doesn’t automatically tie performance discussions with compensation.

The company recently released an app that does away with traditional performance reviews and offers, instead, things like weekly surveys and swipe-to-rate check-ins, allowing companies to get real-time feedback about employee performance, engagement and happiness. Finding a solution like this—one that eliminates the dreaded performance review of the past but still provides engagement and valuable feedback—is the wave of the future.


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