Performance Reviews Are Dead…But What’s the Alternative?

Last week I observed yet another corporation, GE, eliminate performance reviews.   This has not only become a growing trend, but a trend that now looks permanent. Adobe, Motorola and most recently Accenture have already stopped and many more continue to evaluate their options.

http://qz.com/428813/ge-performance-review-strategy-shift/

This is not a surprise, especially after so many years of thought leaders like Sam Culbert of UCLA’s Anderson School of Management encouraging companies to stop the madness.  (See Sam’s book Get Rid of the Performance Review!)  But now it is a reality organizations must consider and act on.  We at Shared Performancehave for years been developing solutions that help address this problem.

After sharing the GE article with a friend at another large enterprise, I thought their response captured the challenges organizations like these face.

“That’s interesting and we have just dropped them as well.  I am not sure we have figured out what it really means …”

My friend’s response raises an important question: What are the unintended short-term and long-term consequences of removing the performance reviews and not having a proven, viable alternative?  While the performance review process failed to deliver its intended purpose, there are still legitimate performance management needs that must be fulfilled.  From promoting talent to protecting interests, how will organizations manage performance moving forward?

Many times, performance reviews are perceived to be the performance of an individual but what if the individual works for a manager or organization that is a low performer.  Or how does an individual perform and grow their career inside the matrix organizations we now work in?  The solutions for the future cannot just support the organization’s interest but it must also protect the short-term and long-term interest of the individual.

Forrester Research predicted this trend in their 2014 research by highlighting the fact that existing vendors have “automated a flawed process”. The flawed automation has accelerated the need for companies to address the root cause of the performance review problem.

Donald Sull recently made the case in his HBR article that communication does not equal understanding.  Increasing and escalating complexity is impacting how we work and we must stay united around the key outcomes that drive both organizational and individual performance.  Outcomes link up, down and across the organization and people must stay connected to those outcomes in order for their work to have meaning and purpose.   While enabling individuals with direct line of sight to the outcomes they impact is now possible, many organizations cannot even define and link all the required outcomes, let alone measure an individual’s impact.

Individual performance is only one piece of why people and organizations achieve outcomes.   The long-term solution requires more than just turning off the performance review in hope that everything works out okay for individuals and the organization.   New approaches like Enterprise Outcome Management provide the discipline, processes and tools that not only allow everyone to execute to a common set of outcomes but also offers a secondary benefit, a viable alternative to the traditional performance review process.