Reinventing Performance Reviews: A Guide to Modern Methods

At Zalando, a German online retailer, employees crowd source feedback year-round using an app.  

They reach out to managers, peers and even customers to seek their view on meetings, projects completed and campaigns. The feedback is both structured, based on questions prompted, and unstructured.  

The app weighs responses based on the relationship between the reviewer and reviewee. Towards year-end, the app aggregates feedback and proposes the top 10% performers.  

According to McKinsey & Company, managers can thus use “a fact-based, objective way to identify truly distinctive employees. Companies can also use such systems to identify those who have genuinely fallen behind.  

Today, nine out of ten companies use performance reviews to decide compensation, found The Economist. Today, companies are jettisoning transitional review methods which rely more on subjective assessments and are one-off exercises conducted at least once a year.  

Instead, companies are using diverse methods to measure performance in view of the hybrid and remote work formats, emphasis on competencies over skills and adoption of automation tools to simplify repetitive processes.  

Already, companies like Netflix don’t measure people’s performance against annual objectives, according to Harvard Business Review. And Google has renewed the way it compensates and recognizes performance at every level. Google’s HR team has stressed paying employees for “What they’re worth and not for the job they do”.  

Need to reimagine performance reviews  

According to Deloitte research, the impact of new performance review practices is high. Almost 90% of the companies that have redesigned performance management have seen direct improvements in engagement levels. Further, 83% of companies are now seeing improved conversations between managers and employees.  

The need to redefine performance management today is urgent owing to the following reasons: 

Changed work formats

Today’s teams are working in different work formats like remote, and hybrid. There is also the growth of the gig economy. Companies are also operating as networks of teams and emphasizing a stronger link between performance management and business objectives. Thus the year-end reviews that were designed in 1970s are not enough. 

According to Deloitte, employees today are also seeking more regular feedback and expect continuous learning. Further, as companies are operating more in teams, performance reviews should be local.  

Personal vs professional goals

Employees today seek an integration of personal and professional goals for greater work fulfillment. This is also essential in the context of work-life integration, with blurred boundaries between them. Gartner has found in a survey that 82% of employees want their organizations to view them as ‘people’ and not just employees.  

Performance development

Firms like Deloitte are embracing a forward-looking approach to performance. Reviewers are asked about what they would do with the reviewee in the future rather than what they think of their past performance. This opens a conversation about performance development.  

By focusing on future possibilities, companies can identify areas for improvement and accordingly tailor development interventions.  

Beyond input-output paradigm

It’s time companies move beyond the second industrial revolution obsession of measuring inputs and outputs, says an article in Fortune.  Today’s companies are adopting an ecosystem approach to fuel performance, by focusing on resources, peer networks, support systems and simple communication that teams and individuals need to boost performance.  

Tech-enabled performance roadmaps

Organizations are leveraging technological innovations to make performance reviews more objective and fairer. They can also help personalize development plans for individual employees based on data gathered using technology. For instance, AI assistant Myca shows employees potential career paths and development plans within the company by scanning their CVs and reviewing feedback.  

What are modern performance review methods 

Today’s companies need employees who are not just satisfied or productive, but also thriving, posit authors of an article in Harvard Business Review. This helps create sustainable organizational and individual performance.  

Such performing or thriving employees showed 16% better overall performance, 125% less burnout and 32% greater commitment to the organization. Thus, using modern performance appraisal methods becomes essential. Here are some newer ways to review and develop performance:  

Objectives and key results

This includes a collaborative goal-setting approach in which employees and managers set department, team and individual objectives with measurable key results. Goals should be SMART – specific, measurable, attainable, realistic and time-bound.  

The Harvard Business Review Guide on Performance Mangement exhorts professionals to go beyond the SMART methodology to set goals that are also aligned with organizational strategy, and are framed in time with clear deadlines, are achievable but challenging and tailored to the individual.

Continuous feedback culture and check-ins

Individuals who get frequent, constructive feedback perform 12.5% better than others, according to research in Journal of Applied Psychology. These include regular one-on-one meetings among managers, employees and peers. They help identify progress towards goals, identify obstacles and chalk out development plans.  

For example, Adobe Systems had developed a continuous culture by dropping rankings, ratings and annual reviews. Instead for employees, objectives are more agile and there are frequent feedback discussions. Further, Deloitte uses the performance snapshot dashboard to seek frequent feedback from multiple sources throughout the year.  

360- and 720-degree feedback

In 360-degree feedback, insights are gathered from colleagues, managers, direct reports and peers in other departments. Whereas, in the 720-degree format, feedback of even external stakeholders is considered.  

Employees can be evaluated by those outside the organization: suppliers, customers, investors, community leaders, and other external stakeholders. This shifts the 360-degree review to a 720 (360-degree internally + 360-degree externally = 720), according to ‘HR from the Outside In: Six Competencies for the Future of Human Resources’.  

The book further highlights that 720-degree feedback lets individuals know where to improve and it also provides organizations with inputs about how to design and deliver HR practices to upgrade talent. 

Informal reviews

For instance, in Netflix people are asked to identify things that colleagues should stop, start or continue doing. Such conversations are unstructured and create a psychologically safe environment to share feedback. 

Team appraisals

These focus on collective strengths, weaknesses and overall effectiveness of teams as a unit. These may include goal setting and alignment, process and communication evaluation and performance measurement around achievement of collective goals.  

Team performance reviews help improve team dynamics and performance. They also help align outcome of team efforts towards achieving organizational objectives. 

Human Resource Accounting Method

This includes analyzing the performance of people based on monetary outcomes they yield for their company. You compare the cost to the company of retaining the employee and the contributions they’re making to the company’s topline. For instance, the Bank of America has used this method to gauge the impact of employee turnover on its financial performance. 

For remote teams

This is especially useful for remote teams which are geographically dispersed. A Values-based approach helps in strengthening a unified culture while enabling performance reviews. Organizations must also leverage relational analytics to identify network of relationships across the organization and seek feedback.  

According to MIT Human Resources, employers avoid measuring only activities and labor hours for remote workers. They must strive to measure performance holistically, by also accounting for accomplishments and outcomes. They must also balance qualitative and quantitative assessments and between objectivity and fairness.  

How to pick right method for you 

Picking a performance review method depends on several factors, including relevance for industry, segment, business goals and organizational culture. Workforce characteristics and organizational structure also play a role.  

According to Deloitte 2017 Global Human capital Trends, you can select the suitable method for your organization by considering the following aspects:  

• Identify a strategy for PM: Assess what the new PM system is trying to achieve and how you could align it to business strategy. Also consider how it would help nurture a leadership pipeline.  
• Learn from peers: Consider studying the practices of firms in similar industries or segments  
• Evaluate the best practices`: Among companies following best practices, identify “the design elements, tools, and processes that are most effective for them”. Internally, spot high performing teams and individuals and replicate those practices organization-wide. 
• Tailor PM strategy to organizational needs: New performance review methods should be driven by change management strategies as some organizations, following traditional methods for long, may be resistant to change. The implementation of new methods should be at a pace comfortable for the business.  
• Upskill managers in coaching skills: Organizations should train managers to become coaches to ensure all-round development of employees. According to the article, “Companies adopting a new PM approach should focus heavily on leadership development, building new “muscles” in managers, and creating discipline around feedback, coaching, and collaboration.”

Tech buddy for modern methods 

HR Tech platform Keka lets you pick modern performance review methods suitable for your company and integrate PM systems with other systems like rewards and recognition and leadership development. Here’s how Keka helps you:  

Create continuous feedback culture

Conduct regular check-ins by scheduling one-on-one meetings among employees and managers. The expressions wall, that functions as the company’s social media platform, lets employees recognize one another’s performance and bolster the company culture.  

Conduct 360-degree reviews

You can conduct reviews of employees by taking inputs from peers, managers, subordinates and collaborative colleagues in other functions. You can also define role-specific competencies and measure performance against them. Organizations may also use the bell curve or the 9-box-grid matrix methods on the platform.  

Agility in goal setting after reviews

Keka lets managers and employees set goals and review them based on performance reviews and evolving organizational objectives.  Employees can also clearly see how their goals are linked to achieving the larger departmental and company goals, and this helps boost engagement levels and work fulfillment.