The end-of-year assessment is a time-honored ritual in most companies, but is it worth the effort?
In recent years, a small group of contrarians have argued that the year-end review is no longer viable. The assessments fail to motivate workers and are dreaded by employees and managers, so goes the criticism. Samuel Culbert, a professor at UCLA’s Anderson School of Management, even wrote a book on the subject, called Get Rid of the Performance Review: How Companies Can Stop Intimidating, Start Managing — and Focus on What Really Matters. According to Culbert’s research, most companies follow this rating formula no matter how their workers rate:
* 70 percent of people are rated average in a review.
* 20 percent are rated excellent.
* and 10 percent need improvement or need to be replaced.
Culbert argues that the review is a “fraudulent, dishonest and pretentious” practice. And he’s just getting warmed up.
Companies scrap the review
Scott Westcott, in an Inc. magazine article from Nov. 2007, chronicled two companies that did this and both proclaimed the experiments a success. Brian Roth, CEO of Trufast, a manufacturer of fasteners in Bryan, Ohio, explained: “The only thing the review did was cover the previous two weeks of performance. Then it motivated the employee for another two weeks with a 3 percent raise. Basically, it was worthless.”
Craig Erlich, CEO of Pulse220, an experiential marketing firm in Southfield, Michigan, argued that the year-end reviews caused problems by linking compensation too closely to infrequent feedback. ”By not talking about performance and compensation at the same time, you cause the review to be as meaningful as possible,” he said. “When you have the noise of compensation in that room, a lot of other stuff gets ignored.”
The answer to ineffective year-end reviews: More reviews!
That may sound counterintuitive, but Allen Schweyer of the Center for Human Capital Innovation argues employees need “continuous coaching and feedback,” helping employees to build on their strengths, rather than trying to fix their weaknesses. And in the era of constant updates on social networks, some companies are buying into this idea, reports The Wall Street Journal.
David Hauser, co-founder of the Needham, Mass.-based Grasshopper, reports that every two weeks, his 50 managers and employees have one-on-one, 30-minute meetings to discuss performance and set goals. “Instead of these big scary meetings, there are frequent meetings with much less pressure,” he said.
Of course, there are still plenty of skeptics (see the Plus section below).
Where do you stand? What would happen if your company eliminated performance reviews?
With all of these screeds against the annual performance review, you might be wondering: Does anyone still think it's a good idea? The strongest argument we found against Culbert's point of view came from Jessica Lee on the Fistful of Talent blog.
"Samuel Culbert isn't an HR pro. He has NEVER practiced HR. He's taught, he's written, and he's 'consulted.' And just so you know where I stand, I have a really hard time with someone preaching from the pulpit who has never walked a mile in the shoes of... me, or you," she writes.
For a lengthy but exceptionally detailed breakdown of everything you'd ever want to know about year-end reviews, we strongly recommend this article from Wharton's web site, which is replete with data and anecdotes on every angle of the performance-review debate.
You'll also appreciate Steve Axelrod's article in Forbes entitled "The Right Way To Give A Year-End Job Review."