At the start of the new year, the annual appraisal may well be a dim and distant memory as you move into a new cycle of setting objectives and targets. But how much time have you spent looking at the process of the annual appraisal in your company and whether it is time well spent?

My experience is that the annual appraisal often had the effect of demotivating employees – the forced distribution curve, the link to pay and the rules around bonus payments, meant conversations were often spent focusing on the past and the rationale for the rating, and consequently managing the employee’s expectations around the level of salary increase or bonus, rather than focusing on the quality of performance or the employees’ aspirations.

In addition, many staff don’t work alongside their manager’s on a regular basis, so it becomes more challenging to assess the level of performance.

Many well-known companies are doing away with the formal annual appraisal but what are they replacing them with? Well despite the headlines, these organisations are not doing away with reviews completely – they appear to be removing the “tick box” processes and trying to shift the focus onto the quality of conversations held by managers with their employees.

This also fits with the need for organisations to work more flexibly – many people work in teams, may work for multiple managers during projects and as a result the ability to allocate a rating becomes more complex.

This is supported by lots of research which indicates that performance reviews should

  • Be frequent and future focused,allowing the employee’s performance to be steered in the right direction and making improvements/changes which have a positive impact on performance immediately

  • Have a coaching focus which includes regular feedback

  • Allow for ongoing development ensuring the employees achieve their potential and resulting in more motivated,engaged staff.

So the main shift seems to be how managers approach and conduct performance discussions. No doubt there will still be a need to record the discussions, but surely the change of focus to one of regular conversations with a coaching focus should lead to all round improvements both in performance and motivation and as a result improvement in organizational performance? Well only if your managers feel confident and capable of holding these types of conversations - so development for managers may be essential to achieve this.

Removing the annual appraisal may seem like a risk, but surely the bigger risk to the organisation is not having high performing, motivated staff.

If you’d like to talk about having great performance discussions in your company, then please contact us.

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