Why You Should Get Rid of Your Performance Reviews

Written by Jamie Notter on September 7, 2016

Some really big companies (like GE, Adobe, and Deloitte) have recently eliminated their performance reviews, with a bit of fanfare and media coverage. We all kind of hate the performance review process, so I think it felt a little liberating to know that these huge companies could just let them go. And for companies that size, the issue is a big deal. Deloitte estimated that their people were spending 2 million hours annually just completing the process. That’s a lot.

Associations are not spending that much time, certainly, but it is enough time to warrant a look at the whole thing. In this day and age, we don’t have the luxury of wasting time and annoying our employees, so we should be evaluating performance reviews and determining if we should keep them or not.

In most associations, I’m betting that you’ll be able to make a solid case for dumping them. This is one of those organizational processes that we’ve been doing roughly the same way for decades, because, well, we’ve always done it that way. It’s ripe for removal or reinvention. But here’s the trick:

If you get rid of performance reviews, you still have to find a way to solve the problem they were intending to solve in the first place.

What is that problem? Hmmm, the fact that we have to ask that question (and that you may not have a clear answer) is actually the problem. For years we’ve been trying to solve several different problems with performance reviews at the same time, and that’s one reason why they don’t work. The three main problems are:

  • Compensation distribution (i.e., raises and bonuses)
  • Firing people (documenting poor performance primarily for liability and legal reasons)
  • Developing people (creating individual development goals)

If you have one process that does these three things at the same time, it is guaranteed to fail. If you’re using the process to determine who gets a 2% raise versus who gets a 3% raise, then people are going to work hard to game the system as much as they can to get the raise they want. There will be pressure to put people at a 5 for “they deserve a raise” reasons, but that means that they get a 5 in something that for developmental reasons is not the most accurate feedback. And then that one time that someone needs to get fired, suddenly the scoring has an entirely different meaning. It’s all mixed up, so it ends up being a waste of time. I suggest creating three new systems instead.

Create a compensation distribution system that is its own thing, and make the judgments not about how well someone performed, but how valuable they are to the association, combined with how close their pay is now to industry standards. That kind of system probably only needs touch-points a few times a year, though it requires the organization to be rigorous in defining what “valuable” means.

Create a “coaching out” system that has a clear process for documenting performance that is not aligned with the organization’s success. This one’s never on a regular schedule, because it should be responsive to very specific situations.

Create a growth-support system that continually aligns the growth of the individuals and the organization. This one’s closest to the original system, though as everyone will tell you, it needs to be more continuous than this once-a-year business. Lots of one-on-ones and other touch-points. It balances individual development with the needs of the organization.

If this sounds like a lot of work, that’s because it is. Welcome to leadership in the 21st century. It’s time we raised the bar.

Recently, Jamie Notter hosted an all-Millennial panel to discuss ways to engage their generation, and performance reviews was one of the topics of discussion:

Written by Jamie Notter on September 7, 2016
Article Type: Strategy
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