How many of you use annual performance reviews? And how many of you think that there must be a better way to manage your employees? If so, read on.
A growing number of Fortune 100 companies indicate that they are either moving away from traditional numerical ratings or abandoning performance reviews altogether.
The cited reasons vary. Some companies mention frustration with trying to accurately capture the entirety of an employee’s contributions by simply checking a box or assigning a numerical rating. Others note that annual reviews are time-consuming and unpopular with both management and employees. Some say that reviews create a focus on “grading” an employee rather than developing that employee, particularly when an ongoing issue is raised for the first time in a review.
Further, in our fast-paced world, some companies question whether it makes sense to evaluate employees by looking back at the past year instead of providing real-time feedback, knowing that most of us do not clearly remember what happened 11 months ago. Some companies also note that the annual review model is not consistent with the company’s culture, and it is not actually a helpful tool in improving performance.
Pros and Cons of Performance Reviews
What legal issues can arise from performance reviews? If you terminate an employee for performance reasons when she has 10 years of positive reviews, then those reviews may undermine your termination decision. Further, you can end up with problems if your management rushes through the process or provides colorful comments. For example, “Alfred is a great employee when he manages to make it to work,” when Alfred has just recently been on leave under the Family and Medical Leave Act, or a comment like “You can’t teach an old dog new tricks,” to an older employee who is struggling. Finally, supervisor bias or favoritism can create inconsistency within the process.
All that being said, there are benefits to performing annual reviews. First, using the same performance system for all employees in a particular job setting can help promote consistency and objective evaluation of employees. Additionally, performance reviews may be helpful supplemental documentation to support performance-based discipline or termination. It can be a positive way to improve employee performance and re-establish performance expectations.
Applying a uniform evaluation system can also provide support as to why certain compensation decisions were made. The Equal Pay Act of 1963 prohibits sex-based wage discrimination between male and female employees whose jobs require equal skill, effort and responsibility unless the difference in compensation can be traced to a factor other than sex, such as a consistently applied merit system. Many state pay equity laws are even more pro-employee. Thus, objective performance ratings may help explain why a male employee is paid more than a female employee in the same (or comparable) position.
Alternatives to Annual Performance Reviews
If you abandon the traditional annual performance review model, how should you provide feedback to your employees? Like so many things in the world of employment law, the answer to that question will depend on your company, your resources and your needs. In general, if you want to move away from a traditional review process, think about processes that will allow you to give feedback more regularly and less formally. Consider whether you have an electronic platform that would allow you to provide continuous or regular feedback to an employee as you notice issues or when you want to recognize successes. And there are apps for that! Further, think about providing a mechanism for employees to be able to request a mini-evaluation and ways to provide both short- and long-term goals. You might even want to allow individuals other than the immediate supervisor to provide performance feedback.
Creating and Troubleshooting a New System
If you are interested in creating a new review process, you could always start by taking a page from the book of another company that has revamped its performance assessment systems. Take Adobe, for example. In 2012, the vice president of people resources decided to abolish the performance review system and created “Check-in.” On its website, Adobe describes Check-in as “an informal, ongoing dialogue between managers and their direct reports that has employees feeling more engaged and empowered.” Adobe describes the process as: focusing on regular discussions with managers about priorities and expectations; providing feedback on a quarterly basis (at minimum), without any formal written documentation, and assessing performance without providing rankings or ratings. Further, Adobe’s program is outlined online and free to the public.
How do you address processes that are often tied to annual reviews, like raises and promotions? Again, it depends on your company. By way of example, you might decide to combine frequent, informal feedback sessions with a streamlined annual review where compensation decisions are made, or you might base compensation on quantitative data that is gathered in the course of your business operations.
Further, management training will be key if you decide to move away from the traditional model. You need to be sure that your managers are conscientious about basing compensation or employment decisions on merit. Further, you will want to ensure that you have written guidelines for your new performance process and that your employees understand those guidelines. I can guarantee that someone will find a way to make an offensive comment or retaliate for honest feedback.
Logistically, if you decide to use an online medium or app for your ongoing performance discussions, ensure that the data you enter will be retained throughout the individual’s employment. The ability to access ongoing performance discussions will be critical if a disgruntled or terminated employee should decide to file a charge or lawsuit.
Finally, please do not interpret this article as suggesting that you abandon your disciplinary/performance improvement process! If the informal review process (or a traditional one, for that matter) is not sufficient to correct performance issues, then you need to begin a documented process to set concrete expectations for performance and hold employees accountable if they fail to do the job.
While not every employer will decide to abandon the traditional performance review model, following these tips will help you if you decide to say “No!” to annual performance reviews. TR
This column is made available by the attorney and publisher for educational purposes only to give you general information and a general understanding of the law, not to provide specific legal advice or to establish an attorney-client relationship. This column should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.
Susan Bassford Wilson is a partner with the nationwide employment law firm of Constangy, Brooks, Smith & Prophete, LLP. She can be reached at [email protected] or on Twitter at @bassfordwilson.