A better method for employee performance reviews

By Jim Annis, CEO

Traditional performance reviews can be a source of conflict. A slightly negative review can break an employee's morale and be a precursor for their exit. If they are a "keeper," taking a risk is not an option, especially in this competitive market for talent.

According to the Society for Human Resource Management (SHRM) article entitled, “Is It Time to Put the Performance Review on a PIP (Performance Improvement Plan)?”, the number of employers that are either ditching the numerical ranking of employees or tossing out the entire performance review process has grown from 4 percent in 2012 to 12 percent in 2014, as referenced in a CEB survey of Fortune 1000 companies. Does ditching the traditional 1-5 performance ranking and "expected" raises work for your company or against it? We believe it encourages avoidance and is uncomfortable for everyone, and most people don't leave feeling empowered or positive.

HR executives need to be adaptable and flexible to match the rapidly changing work environment. Communication – not one-way but true dialogue – in real time via technology, less formality in our work and home life, and increased mobility have made the traditional performance reviews into dinosaurs. Innovative companies are flattening operations, including giving line employees the power to change floor production in real time using APIs. HR can learn from that kind of forward thinking.

One alternative to explore is the "coaching" conversation, or a naturally occurring dialogue that happens at a "natural" break in workflow. For example, managers can initiate it with employees on completion of a project and seek feedback. This method removes "human error" because – I don't know about you – but remembering what I had for lunch can be challenging, let alone detailing last year with perfect recall. Coaching conversations are more authentic, consistent and accurate. They also bolster on “great place to work” characteristics, fundamentally build and reinforce trust and move from a one-way info dump to a more actionable and collaborative effort. To be fair, the employee should have an option to imitate a formal review if they prefer.

Coaching conversations ditch the old ranking system for open-ended questions (Think this sounds like a good salesperson's technique? You're correct, but only when paired with great listening skills). We suggest a quarterly conversation, yet there is no hard and fast requirement. Create a section in your employee handbook so that you have 1) clear expectations; 2) frequent check-ins; and 3) clear feedback mechanisms. Now of course not everything is “kumbayah.” You still need to manage the employee. Disciplinary issue? Document it. If you are engaged as a manager, you know who deserves a raise and who doesn't so be sure to link your HR strategic compensation strategy to the new review format in order to remain competitive.

Implementing the coaching philosophy appeals to millennials, the largest generation represented in the workforce. They want to feel valued and taken seriously and classic reviews are too paternalistic and top down. If you casually say, "Let's chat now that the project is done about how things went," versus "Your performance review is scheduled for x date and y time," I would choose the first option any day. They would too. Will they be able to choose that option at your company?

Jim Annis is president/CEO of The Applied Companies, which provide HR solutions for today’s workplace. Celeste Johnson, Applied's COO, contributed to this article.