Why Companies are Abandoning Performance Reviews

The yearly ritual of evaluating and sometimes rating and ranking the performance of employees has many flaws that are constantly overlooked. This method is time-consuming, excessively subjective, demotivating, and ultimately unhelpful. In addition, employees find these evaluations to be quite stressful. Employees are unsure how to improve their performance, and instead, they stress about the ratings and worry about how it is going to affect their compensation. This fear defeats the whole purpose of the performance feedback, and the entire event does little to improve employee performance.

However, over the past 15 years and with today’s competitive job market, many companies have evolved and made great strides when it comes to performance reviews. More than ever, positions require employees with more independent judgment, deeper expertise, and better problem- solving skills. However, these skills and greater responsibilities required are not thoroughly demonstrated through the performance – management systems. Although there have been great changes, nearly 9 out of 10 companies around the world continue to make performance scores for employees. Many companies are afraid of abandoning this method as they are unsure what other methods to adopt or how to determine how much employees get paid.

Recently,  Accenture stated they were going to get rid of 90% of their performance evaluation. The CEO, Pierre Nanterme, mentioned that they were not sure if “spending all that time on performance management has been yielding a great outcome”. In addition, performance evaluations don’t seem to be working for the millennial generation.  

Accenture isn’t the only one who believes this performance evaluation is outdated. Businesses such Microsoft and GE are now testing out new practices where employees are continuously receiving feedback and coaching, Netflix no longer measures its employees against annual objectives and Google transformed the way it pays high performers at every level. Many companies are taking on new approaches, and in some cases, some are experimenting. Overall, some patterns are beginning to show.

  • Performance data are used less and less as a tool for setting compensation
  • Many businesses are collecting more objective performance data through systems that allow real time analysis
  • Revising employee performance by specifically focusing on individuals who are at a step function away from average – at either the low or high end of performance – rather than trying to differentiate among the bulk of employees in the middle.

To conclude, many companies are now shifting and redefining the performance evaluation system. Companies are now focusing on how they can help employees develop their skills as individuals. In the future, performance evaluations will likely include more feedback and greater emphasis on better developing employees. After all, a business’ most precious resource is its employees!





Author: Editorial Team

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