The time has come to kill performance reviews

(Editor’s note: David Stein is co-CEO of Rypple. He submitted this story to VentureBeat.)

The annual review is one of the most dreaded tasks on any employee’s to-do list. Companies won’t give raises and promotions without it. Human resource departments demand the forms, supposedly for legal reasons. And the process is fraught with anticipatory angst, defensiveness and dread.

But the worst thing about annual employee performance reviews? They simply don’t work.

The performance appraisal system’s greatest shortcoming is that it’s not really about improving performance. It’s about sticking to a schedule and complying with human resources guidelines. By emphasizing process over results, the performance appraisal system has fatally lost credibility.

Samuel Culbert, in his book, “Get Rid of the Performance Review: How Companies Can Stop Intimidating, Start Managing – and Focus on What Really Matters,” described the annual employee performance appraisal as a “pretentious, bogus practice . . . that produces absolutely nothing.” Workers require “evaluations dictated by need, not a date on the calendar.”

A Psychology Today article cites a 2005 national survey by consulting firm, People IQ, which reported “87 percent of employees and managers felt performance reviews were neither useful nor effective.”

In short, performance reviews are dangerously archaic. When the economy was about how many widgets an assembly line worker could solder in a day, maybe they made more sense. But the assumptions underpinning annual reviews—standardized job descriptions, strict hierarchies and (above all) stable market conditions that allow for annual planning—are completely out of date. Companies must change this process now. Here’s why:

The current high unemployment figures belie the tight labor markets in certain sectors, particularly knowledge industries. These workers want more than good pay; they expect a level of coaching and professional development that traditional performance appraisal systems don’t support.

Also, the so-called “Generation Y”—as many as 80 million in the US alone—will soon dominate the workplace. And this generation expects constant feedback. Significantly fewer baby boomers feel the same way.

Social software tools make it possible for supervisors to reclaim their role as employee coaches rather than strictly managers. They also make it possible for companies to accurately measure performance.

The best feedback-oriented systems have the following characteristics in common:

• Regular coaching: Using tools like Rypple, among others, managers and employees can keep weekly notes of agreed objectives and goals. This lets both coach and employee quickly assess progress, say thanks, offer immediate feedback and reprioritize goals, as necessary.
• Broad-based, real-time feedback: Managers can’t be everywhere. Particularly in today’s hyper-speed workplace, the contributions that matter may happen so fast and unexpectedly that they never make it onto a form. Most social software tools have a public feed where everyone on the team can comment and say thanks. Scan that feed periodically and see who gets called out for going above and beyond. It may not be who you think.
• Regular review: Instead of filling out lengthy forms once a year about long-ago (and fuzzily remembered) activities, schedule a 30-minute session every quarter and use the tool to go over what actually happened during the past few months. The review should include not just formal goals from 1:1s, but comments and thanks from the public feed that round out the picture.

Bottom line: human memory is fallible. Evaluations based on actual data recorded in real-time can take the anxiety out of reviews and provide a better picture of employee performance.

By integrating feedback into everyday corporate culture, companies can change evaluation from a once-a-year chore to a valuable everyday tool for insight and learning. And the dreaded annual performance review can finally be laid to rest.

Tags: employee reviews