By Janice Burns, Chief Career Experience Officer at Degreed.

It’s not an understatement to say that the last few months have been disruptive. But therein lies the opportunity to change and strengthen for the better. To reassess processes and tools, to understand what’s working for your organisation and what is better left in the past. One such process is the performance review. 

Make no mistake, in some contexts and organisations the performance review definitely plays a role. However, it cannot be the primary element that all workforce, talent and career decisions hinge on. You cannot make effective forward-thinking decisions by looking backwards. 

The early days of performance management

Performance reviews came to exist around World War I, evolving out of the U.S. military’s ‘merit rating’ system that was designed to identify poor performers for discharge or transfer. After World War II, around 60% of U.S. companies were using them as a way to manage workforce performance. In the 1960s, this grew closer to 90%. 

This was due to several factors. A shortage of managerial talent in the 50s and 60s caused business leaders to use appraisals as a development tool for new supervisors. In the 70s, amid rampant inflation, performance reviews began to link to remuneration. 

Time for change

Now, it’s time to evolve performance management again. Organisations are seeking new ways to engage their employees, inspire loyalty, and drive performance. But the current performance management model cannot achieve this. 

To start, the performance review process is limited by its set-up and foundations. By linking it to financial rewards, they hold people accountable and ‘punish’ them for past behaviour at the expense of current performance and building talent for the future. Performance reviews can also have limited perspectives if they are based on one person’s view (the line manager). This can also introduce bias into the process.

The review process is also time-consuming for both employees and managers. Before it revamped its process, Deloitte estimated that it wasted 1.8 million hours across the firm on an activity that “didn’t fit our business needs anymore.” 

This, ultimately, erodes motivation. Unfortunately, only 14% of employees believe that their performance reviews inspire them to improve. Indeed, in a third of cases, they actually make performance worse. 

Performance reviews also don’t fit with modern ways of doing business. Organisations, more than ever, realise the need for greater agility and responsiveness. Businesses no longer have clear annual cycles. Projects are more short-term and tend to change along the way, and the performance process needs to better reflect this. 

A new approach

So what can be done instead?

Firstly, instead of thinking about performance management, organizations must think about performance enablement. More than half of workers want more regular performance check-ins, at least once a month. Real-time feedback is favoured by 94% of employees. Having frequent, informal check-ins ensure that feedback is timely and relevant. It more accurately tracks an employee’s performance. And there are some strong backers of this approach with the likes of Adobe, Microsoft, Dell, PwC, Gap, and IBM all shifting to a more collaborative and regular style. 

Introducing the performance preview

Better still, leading organisations are looking forward by assessing current performance and skills and growing capabilities for the future. This is giving rise to the performance preview — a dynamic process that closely follows the natural cycle of work. As projects start and finish, milestones are reached, challenges appear, and so forth, conversations between managers and their teams happen naturally. This enables people to solve problems in current performance, while also developing skills for upcoming projects. The focus is always forward-looking, considering what employees need in terms of skills and resources in order to do their jobs well and to keep advancing on their career journeys. 

A skills-led approach

An important facet of this is understanding skills. Knowing what skills people have and what they need, will help to inform the learning and career mobility opportunities offered by a manager. It will also assist people leaders in proactively supporting their employees to map out a career development journey that aligns with the business’ needs and goals. This sets individuals, and their employers, up for success. 

Indeed, close alignment with an organisation’s overall strategy is vital. It tangibly links an employee’s performance to the business’ performance and makes them feel more invested in the organisation and its success. 

Taking action

Obviously, your performance preview should document anything that is discussed and agreed to be actioned. Documenting your agreements ensures that both the employee and manager are held accountable for making progress against the plan. For example, if your employee expresses a desire to learn more coding skills, documenting this in the employee’s development plan will enable the manager and the learning team to tailor upskilling opportunities in this area.  Additionally, understanding the employee’s career goals and interests will help the manager grow their career in a way that suits both employee and employer. This will also provide meaningful evidence that something positive is coming from their performance preview sessions. 

The time is now to begin your performance preview process. It’s a refreshing and dynamic approach that will engage and inspire your workforce and drive your business forward, ready for the future. Start it today and your employees (and organisation) will welcome the change.