Is your performance review system one of the 98% that fail?

A recent article in Fast Company referenced a recent Gallop survey that found that “only 2% of human resource officers at major companies think their performance management system is working” (reference).

My immediate reaction was why are we, as HR Professionals, continuing to use performance management systems that fail 98% of the time?

The article then focused on performance reviews (rather than the broader topic of performance management) and considered two questions:

1.    What is the fundamental thing we’re trying to change?

2.    What happens when AI takes over performance reviews

They concluded performance reviews must maintain the human conversation and nuance and use AI as a tool to help improve efficiency, make reviews more understandable, and assist with career development.  In other words, use AI to tweak the administrative aspects of your existing system. 

I’d argue that is not the fundamental thing you need to change.

To start with, consider the phrase “performance review”.  By definition, that makes it about the past and not the future.

For example, recall Jack Welch’s (CEO GE) famous policy of sacking the bottom 10% of his workforce each year.  His assumption was this portion of employees can never get the job done (i.e. based on past performance)

Yet I know managers that give everyone a 5/5 “to motivate employees” and other managers that never give a 5/5 “to motivate employees”.  I find it ironic that both perspectives are about the future (motivation), not the past (reviewing performance).

If you are one of the 98% that consider your current performance review system is not working, I recommend you make the following fundamental changes.

1.    Create a new policy that states if a manager or employees is causing measurable business problems (i.e. Jack Welsh’s 10%), they are automatically excluded from the ‘performance review’ process until the business problem they are causing is resolved.  Build you policy and process around Proactive Reengagement Programs (learn more).  Now only the “good employees” are ‘reviewed’ and this allows the nuanced human conversations to be positive and focused on the future.

2.    Change the name from ‘performance reviews’ to ‘Personal Progress Review’.  This reinforces a future-focused rather than past-focused process.

3.    To nuance you ‘Personal Progress Review’ conversations, use Behavioural Anchored Rating Statements.  This overcomes the problems identified in the 5/5-rating and Jack Welch scenarios discussed above as the behavioural statements better match current performance and progress against future plans.

4.    Use modern Apps rather than AI to streamline the process and automate reporting and recordkeeping.

5.    Simple real-time analysis across the organisation is now possible as Behavioural Anchored Rating Statements incorporate numerical ratings, and the Apps capture relevant organisational data.

6.    Keep salary reviews as a separate process.  While the above data will no doubt be incorporated into salary discussions, so will many other variables.  But by keeping it separate, the ‘Personal Progress Review’ maintains the focus on development.

In conclusion, the above approach will fundamentally change your performance review processes without the need for AI.

For the past 25 years this approach has been successfully applied in industries as diverse as mining, childcare, government agencies, not-for-profits, and manufacturing with excellent results.  It makes reviews more understandable, increases consistency, minimises bias, assists with career development, and is more efficient.

If you want to stop being part of the 98% using failed performance review systems, make the changes I have outlined.