The Performance Review is dying — here’s how to build its successor.

The Performance Review is slowly dying. There’s nothing bold in that statement. Pretty much every HR blog, publication (for example: HRBForbes) and industry analyst (for example: GallupGlassdoorBersin) is singing the same refrain: The traditional Performance Management process needs to be replaced.

Perhaps paradoxically, many companies actions run contrary to this, as they still cling to a traditional review process. Despite the universal dislike, companies recognize the necessity of evaluating performance and replacing this process is often viewed as a risky change initiative. Many are hanging on to it because simple alternatives are rare, and the outcomes are badly needed. Often Performance Reviews are still used by many businesses to:

· Hold employees accountable

· Provide employees with feedback

· Guide administrative decisions like promotions, bonuses, or pay raises

· Align employees with the strategy of company

Research also indicates that dropping Performance Management leads to undesirable outcomes like decreases in performance and engagement.

So, is the process hated? Yes. Is it completely useless? Probably not. However, for the end-user, managers and employees, it seems that the ratio of effort and outcomes is completely unbalanced. CEB survey data suggests that 95% of managers are dissatisfied with the PM process. Among employees, 59% feel the performance review is not worth their time. In other words, the current review process is high effort but extremely low value for the user.

We believe there is a second root cause that makes the performance review HR’s problem child: The data coming out of the process is at times specious at best. Only 4 percent of HR leaders believe that their organizations accurately measure employee performance. In other words, performance review is not just tedious, the outcomes are probably bogus too.

So, from our perspective at Rhabit we see three main problems with the current performance review approach: Bad data, high user effort, and low value to end users. So what do we do to address these issues? Here’s our take below:

This three-step process is a rough guideline to evolve a performance review approach that could better empower your employees with meaningful data with a more efficient process. It probably doesn’t answer all questions. However, taking a long hard look at the research, addressing all three problems to some degree should put you on the pathway to adopting a performance management process that adds real value to your company and culture.

Step 1: Improve the data

The first step in our opinion is to improve the quality of the performance data that is used in performance reviews. There’s a really practical way to get started — for example, a key step is to transition from the manager as the primary measurement point to collecting data from the entire work environment: coworkers, direct reports, and managers. Managers often do not get to observe their direct reports as much as their coworkers, especially in modern work environments where roles are more cross functional. Therefore, we recommend collecting performance data (ratings) from the entire team.

In annual or even semi-annual reviews manager and employees have to look back 12 or 6 months and summarize many performance events. However, people cannot recall accurately what happened in the course of these time spans. We recommend adopting more frequent review spans. This doesn’t mean a review meeting has to happen that frequently, but performance should be recorded more often.

Step 2: Decrease user effort

We recommend making every step in the performance review process as low friction as possible, it’s one of the main tenants of how we build products at Rhabit, and we believe this way of approaching your performance management process can have some real tangible benefits. Employees are strapped for time. If they are asked to provide performance ratings for a person, the process must be very simple and low effort. This is even more critical if the performance ratings are recorded frequently (see above) — this process needs to be fast and user-friendly from start to finish. This is great place for using specialized software, as home-made procedures, even when highly customized, are often still too tedious.

Additionally, many of our clients have shared how difficult it is to access their own or their direct reports’ performance data. We have seen everything from piles of paper to dropbox folders littered with the digital debris of thousands of Microsoft Word documents, spreadsheets, email messages, etc. from procedures that require copy and pasting content in multiple places. Hard to access performance data virtually ensure that this data is only accessed during review time. We recommend selecting a software solution that makes performance data transparent and very easily accessible, meaning that it’s easy to find and in a consistent, useable format.

We also see many traditional performance reviews rely on written statements. Even today many modern feedback tools rely largely on written feedback. Written feedback has two flaws that make it unusable to collect performance data. First, writing feedback takes time which feedback providers don’t have (see above). Second, especially negative feedback has to be written very thoughtfully so that the feedback recipient isn’t demoralized by the feedback itself and can maintain a positive, growth focused mindset. Few people have this skill and even those who do often don’t want to risk offending their coworkers. We recommend adopting a process that primarily uses clearly articulated ratings scales but not written statements.

Step 3: Demonstrate value to all users

When looking across the performance management processes we have encountered over the years, we have never seen a process that really puts the end users (employees and managers) first. Performance reviews can be an excellent source of feedback, and the research shows employees like getting feedback as long as it is fair and objective (Zenger Folkman). To us at Rhabit it is quite vexing that this valuable performance data is not translated into value for employees.

Our first recommendation for step 3 is to frame all performance data as a springboard for development and growth. This can be as subtle as avoiding “Meets / Doesn’t Meet Expectations” and to use the finding to plan next steps of development. In the past, performance reviews have had the appearance of a judgment that summarizes the past year’s performance. Even the term “performance review” reeks of reckoning and discipline. This doesn’t have to be the case. A well-designed performance review can be forward looking and instructive. Instead of “you didn’t meet expectations”, a review conversation could aim at improvement: “in this area you can be more effective and here is how”. Employees like using feedback to become more competent, but this feedback has to be instructive as opposed to evaluative.

This change from evaluative to constructive is also reflected in the value a performance review can create for a manager. In the traditional performance review model, the employee’s supervisor is judge, jury, and executioner. This relationship is not easy to maintain and many managers dislike giving feedback to their direct report. In contrast, involving coworkers and direct reports as a performance data source allows managers not to be the sole source of data but to take a partnering position with the direct report. If the judgment is not coming from the manager, he or she can more easily assume the role of a collaborative problem solver or coach. We believe in this environment all managers can also be the talent managers for their direct reports.

Where to head from here:

We have outlined a few steps that we believe are worthwhile thinking about when evolving one’s performance review process. The list is clearly not complete, but we are certain that each item on this list needs to be considered. Of course, at Rhabit we think about this a lot and we are always happy to share how we would design this process using our performance management platform. But even without specialized software we believe that many of these aspects can be implemented. Stick around for more and we’ll keep sharing our thoughts on how you can help build better companies and culture with a modern, thoughtful approach.

Until then — with data-driven love,

The Rhabit Team