As younger, anti-establishment generations become the dominant group in the workforce, yearly reviews are getting tossed in favour of sleeker systems. What are some performance review alternatives?

If the court of public opinion counts for anything, almost everyone agrees that yearly performance reviews are losing meaning in today’s business environment. What’s not so clear, though, is what performance review alternatives should come next.

“We used to be happy to go along with traditional performance management, because in the past there wasn’t a real need to change it,” says Andrew LaFontaine, senior director, Oracle. “As millennials move into the workforce, we are now confronted with their desire for constant feedback.”

Only about 25 per cent of managers and employees think the traditional process works, according to a 2015 Towers Watson survey. Additionally, 50 per cent of employers surveyed plan to scrap the traditional performance review in favour of real-time conversations about goals and experiences. Another study, this one from Workplace Trends and Saba, found that only 55 per cent of employees think traditional ranking systems and performance management appraisals are effective for developing their skills and abilities. This is of course the fraction of employees who even get a review, as the same study found only 52 per cent of companies have a review process. 

Few argue against more focus on mentoring and coaching opportunities, but the question now is will this be enough to gain an accurate understanding of how employees are performing?

Performance management frameworks are entrenched in business practice, says LaFontaine, and there has been good reason for this. Many aspects of performance management are tied to other HR processes, such as remuneration or succession planning. Plus, HR still needs written documentation and progress reports in the case of an unfair dismissal claim.

This muddies the waters, says LaFontaine, and means that new systems will have to be implemented to gauge performance that still comply with the needs of the business. Another concern is that workplaces will suddenly find themselves on the bad side of ‘high-performers’. Once rating systems and ranks are gone, there is no quantitative measure of how employees stack up against each other.

However, research from the Manhattan-based organisation the NeuroLeadership Institute found that traditional performance ratings affect us on a fundamental level – and not in a good way.

“In short, social threats and rewards, like one’s sense of status or fairness, activate intense reaction networks in the brain,” says Dr David Rock, its founder and director and a speaker at AHRI’s 2016 National Convention. “This explains the intense reactions people have to being assessed on a ratings scale.”

It’s clear that businesses can’t entirely abandon appraisals. But what are some ways to bring people management into the 21st century?

Separate performance from potential

“You can have an employee who is good at their job, but there is no link between having a skill and future potential,” says LaFontaine.

Often what happens with ranking systems is that everything gets averaged out to fit a formula or bell curve. But removing ratings actually help develop people faster, says Rock.

“This is happening because of more frequent dialogues, which also tend to be more honest and open when neither party has to worry about justifying a rating at the end of the year,” Rock says.

Look at collaboration networks

HR is the traditional custodian of these frameworks, and the onus has always been on them to make it work. Now that employees are demanding alternatives, it’s time to sort out what works and doesn’t work, LaFontaine says, and that means getting feedback from all parties.

If employees, especially millennials, want to do away with ratings systems and formal review structures, then managers and employees will need to create manageable objectives and make time to have ongoing conversations about those objectives, says LaFontaine. What’s more, feedback and collaboration between peers will become more important to see how everyone fits and works together.

Rock agrees, and says that conventional appraisal systems inhibit collaboration because co-workers will directly compete with one another for the coveted top spot. Rock’s research into performance review alternatives also found that after a company removed ratings and annual reviews, managers had more frequent and richer conversations with their team.

Think to scale

Company size does affect how appraisals are conducted, says LaFontaine, and any performance review alternatives need to be scalable.

“Team leaders might have to think about operational structures and how they manage,” says LaFontaine. “There is a span of control within which managers can effectively operate.”

Meaningful engagement from leaders and line-managers is an important first step in implementing performance review alternatives, he says. Because managers and leaders will be taking on the extra work to essentially restructure the entire feedback cycle, organisations have to think differently about rewarding them.

“When there are no ranking systems or similar structures, managers will have to put in extra work to build the new system. They will have to work harder to properly document everything, create that extra framework, make sure employees are aware of the changes and then make themselves available for those extra conversations or that extra feedback, whatever form that might take,” he says.

With a more frequent and intensive feedback process, companies might also have to think about hiring additional staff in order to ensure each employee gets attention, that managers don’t get overwhelmed and everyone gets the most out of what can be – when done well – a beneficial process.

Dr David Rock is a speaker at AHRI’s National Convention from 3 to 5 August 2016 in Brisbane. To check event details, see the sessions list and browse the exhibition presenters, click here.