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3 Ways Companies Are Changing The Dreaded Performance Review

From using performance-tracking apps to revamping ratings systems, here are ways employers could improve the annual review process.

3 Ways Companies Are Changing The Dreaded Performance Review
[Photo: Flickr user Media Evolution]

If there’s one thing that most managers and employees can agree on, it’s that no one looks forward to performance reviews.

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Managers can spend as much time preparing for these yearly rites of passage as employees spend dreading them. And studies show that they aren’t even always that effective: Nine out of 10 companies surveyed by research firm Society for Human Resource Management reported using annual or semi-annual performance reviews—but just three out of 10 believed they did them well.

Plus, according to neuroscience research, performance-ratings systems can have the potential to adversely impact an employee’s motivation and productivity—and even spark the body’s fight-or-flight response.

So if everyone loathes it so much, why is it so mainstream?

First, a little history . . .

The job-performance assessment got its foothold because labor union contracts required annual reviews to grant merit raises, explains Jason Averbook, CEO of TMBC, a company that works with organizations to redesign annual performance-review systems.

But in today’s fast-paced knowledge economy—with clients and employees alike expecting things in real time—a once-a-year check-in just doesn’t get the job done.

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And that’s why companies like Accenture, Adobe and Gap are moving away from annual reviews and focusing on other methods to evaluate their workforce.

From using performance-tracking apps to revamping ratings systems, here are three ways your own employer could switch up the performance-review process for the better.

1. Forgoing Annual Reviews

Having one major review annually doesn’t always allow managers to fairly assess the quality of an employee’s work.

“The best feedback managers can give are real examples, both good and bad—but with the lapse in time from the event occurring to the annual review, the feedback becomes broader and less detailed,” explains Claire Bissot, HR consulting business development manager at CBIZ, a firm that helps businesses better manage finances and employees. “Traditional ratings may also become less detailed due to the sheer volume of assessments the manager may need to complete.”

And as Averbook astutely notes, most people have a hard enough time keeping track of what has happened over the past few weeks—let alone what has occurred every single day for the last year.

So many companies have started to institute more frequent performance-appraisal methods in order to provide real-time feedback on everything from meeting goals to better handling of, and learning from, missteps.

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How many exactly?

Averbook says that 60% of companies are in the process of rethinking their approach to reviews, and 10% have shifted away entirely from old-school performance-measurement models.

The Gap, for example, does monthly coaching sessions between employees and management—known internally as “GPS” (Grow, Perform, Succeed)—instead of annual reviews. The idea is to focus on real-time feedback that helps empower employees to grow.

At GE, many managers and their direct reports use a performance-tracking mobile app that allows employees to make text or audio notes, attach documents, and upload handwritten notes.

The intent of this technology is to make it easier for managers, employees and others in the company—even supervisors who don’t directly manage a specific employee—to collaborate on priorities, progress and resolutions.

Although there’s still a once-a-year sit-down between manager and employee at GE, it’s framed as more of a conversation that’s meant to guide the employee’s continued progress, rather than a critique that focuses on past actions.

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Why It Can Be a Good Thing: Workplaces are rapidly changing, so a more consistent communication process can help you stay engaged and more efficiently get you the information needed to get the job done, says Nancy Harris, founder and principal consultant at Restart Consulting, a firm that helps organizations reinvent human resources processes.

For top performers it can also provide ongoing moments to shine—and show managers just how much value they bring to the table.

“When an employee can [more consistently] check in, they can find out if their boss thought they leveraged their strengths well, and added value to the work they did,” Averbook says. “Plus, they can have a conversation about what work they loved—and what they didn’t.”

It can also act as an added layer of protection if you report to a less-than-skilled boss.

“All great leaders know that frequent communication with employees is critical to the collective success of an organization, but not all bosses are great leaders,” Averbook says. “This system keeps them accountable, and helps ensure that employees have the support they need to succeed.”

[Related: So You Say Your Boss Isn’t A “People Person”]

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2. Rethinking Old-School Ratings Systems

“Most traditional performance-rating systems involve some kind of scale, whether it’s numerical (the manager ranks an employee on a scale of one to four), or qualitative, such as ‘meets expectations’ or ‘exceeds expectations,’ ” Harris explains.

But asking managers to rank employees based on generic competencies and skills doesn’t tend to give an accurate portrayal of the employee’s value, and, as a result, says Averbook, some companies are revamping old ratings methods.

“Companies are paying a lot more attention to who you are versus what you’ve done,” he explains. “For example, the new ratings [are tied to] what you’re doing right—and how to get stronger—rather than what you’re doing wrong.”

So what does this new way of rating really look like?

“Some companies now use multi-rater feedback, which considers the input of managers, peers and clients,” Harris says. “Other systems, like the one now used at United Airlines, decoupled performance ratings from compensation—the necessity to rate people in order to give a raise or bonus no longer exists.”

At Deloitte, there are ratings, but the focus is on how the actions of the employee being reviewed impact others—specifically, the rater.

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The rater is asked to use a five-point scale of “strongly agree to strongly disagree” to respond to such questions as, “Given what I know about this person’s performance—and if it were my own money to give out—I would award this person the highest possible compensation increase and bonus.”

[Related: 8 Get-Ahead Questions To Ask Your Boss]

Why It Can Be a Good Thing: According to Averbook, these new ratings systems have value for a few reasons.

Not only do they invite feedback from more people—allowing for a more rounded view of an employee—but the feedback that the manager is asked to provide digs deeper into an employee’s actual value.

For example, rather than simply note that “Janice exceeds expectations,” a new ratings system may ask a manager to rate a statement like, “I always go to Janice when I need extraordinary results.”

As a result, it is the employee’s actual value and contribution to the organization—not the rater’s own perception of how valuable/challenging a particular skill set may be—that’s reviewed.

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In an article in Harvard Business Review, two GE employees say the move away from anonymous 360 ratings scales has improved culture at the company, specifically noting that employees have a newfound sense of empowerment and commitment to results-oriented teamwork.

Instead of being told about a weakness that must be improved upon (the old-school way of doing reviews), employees hear feedback on how they may wish to “continue” certain behaviors, or “consider” alternative options.

3. Revamping Compensation Offerings

It can be tough for managers to nurture and retain talent when they’re limited by set pay scales.

And top-performing employees can often feel demotivated knowing that they can’t make more money until annual raise time rolls around.

That’s why some companies have started to get more creative with compensation perks, offering things like biannual bonuses and even peer-to-peer rewards.

“We live in a world of personalization, and not every worker values pay in the same way,” explains Averbook. “Organizations are realizing they are serving the worker, not the worker simply serving the organization.”

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At Costco Wholesale, for example, employees are eligible for bonuses twice a year once they hit the top of the pay scale for their role—a savvy compensation model that helped earn Costco recognition as the number-two best place to work in Glassdoor’s 2014 Top Companies to Work for Compensation & Benefits survey.

The peer-to-peer bonus idea is particularly popular these days: Coworkers at Google can kick a $100 reward to a peer for a job well done. And employees at Zappos are encouraged to give one another “Zollars” that are redeemable for company merchandise or charitable donations, as well as gift a $50 bonus each month to a peer.

According to a 2014 TINYpulse Employee Engagement and Organizational Culture Report, only 21% of respondents said they felt valued at work—but workplace camaraderie was the top reason cited for being willing to go the extra mile.

That’s why receiving a bonus from a colleague who you’re “in the trenches with” day in and day out can be a powerful compensation tool.

“Peer-to-peer bonuses are the equivalent of a Facebook ‘like,’ ” Averbook says. “The recognition can be very good for internal company culture.”

Why It Can Be a Good Thing: When you work at a company with inflexible pay grades, you have three options: Accept that you won’t receive a significant increase each year, transition to a role with a higher pay scale, or change employers.

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But frequently changing jobs for more money means you could miss out on benefits that only come with a lengthier tenure, such as more vacation time, vested stock options and employer-matched retirement contributions.

“Managers should have the flexibility to look beyond standard base pay to consider bonuses and other ways to compensate high-performing employees,” says Bissot.

Bottom line: When your manager—and even a fellow colleague—is empowered to reward you financially for the value you bring, you both win.

Plus, who can’t use some extra cash?

[Related: 5 Outside-The-Box Ways To Combat Work Stress That Really Work]

This article originally appeared on LearnVest and is reprinted with permission.

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