Traditionally, managers completed employee performance reviews once a year. A manager assessed the work done over the previous year. Then, the manager would inform the employee whether or not their work had met company standards. Often times, staff received a score based on performance over the previous year and were ranked among their peers. Then, they’d receive an offer for a promotion or a raise based on their score.
Some businesses took this a little too far. Instead of only rewarding the top performers, they were also trying to separate the wheat from the chaff by firing the bottom ranking employees, year after year. Former CEO of GE, Jack Welsh, employed this method. The system was referred to often as “Rank and Yank.” The bottom 10% of employees were fired annually for twenty years with this system in place.
We’d Never do That!
At Apollo Answering Service, we don’t do a traditional annual performance review. In fact, we think that the traditional, annual performance review is an outdated way of managing employees and ultimately, a mistake for your business. But we aren’t the only ones.
Are Performance Reviews Dead?
annual employee performance review
We think so. Though GE had been known for their rank and yank system, they completely pulled the plug (pun not intended) on performance reviews not too long ago. No more ranking, no more yanking. But why?
Performance Reviews are Often Unrelated to the Work
Annual performance reviews are a dated tradition that goes back to the industrial revolution. Back when labor was manual. It was apparent back then when a laborer was or was not living up to the standard of his peers. When a manual worker’s work is gauged, you can see: did they make as many of your product as their peers, as fast as their peers? Simple.
Performance is much easier to evaluate on this traditional model with manual work. But work has become more collaborative and more knowledge based. Knowledge work is a little different; it’s not as easy to measure. You can’t boil thought work down the same way because you don’t consistently have the same end product nor do you consistently go through the same series of steps. You’re often paying for your employees’ innovations and ideas, not their task efficiency.
You can’t quantify ideas.
Managers don’t like Annual Performance Reviews
We’d like to think that it’s only the poor performing employees that don’t like performance reviews. But face it, managers don’t like them either. If an annual employee performance review is necessary, there’s going to be an uncomfortable conversation about the work that the employee has been doing. The formality of the conversation only makes it more stressful for both parties.
When a manager works closely with someone, they should have a pretty good relationship with them. They know if the person has a family and many financial obligations. When they’re tasked with giving a review that dictates whether or not that person will get a raise, they may take this information into consideration. Instead of giving a direct and honest review that could better the company, instead they could choose to give a more favorable review. No one wants to be the “bad guy” and threaten another person’s salary.
Many managers dislike giving out performance reviews so much that they avoid it entirely. They often are months overdue. In cases where employee raises are tied to a performance review, this is especially problematic. When an employee isn’t getting their raise based on their manager’s inaction, they feel undervalued and unmotivated to perform.