Head over to Google and search for the term, “performance review,” and you’ll be instantly flooded by news stories on the latest companies to do away with it. My guess is that half the Fortune 500 will kill annual rankings and reviews by 2017.
But as that institution of performance management fades away, what’s taking its place? To answer that, here’s a look at six companies (and many more here) that have recently put in place some of the most forward-thinking alternatives to the dreaded annual review.
GE’s performance management overhaul earlier this year is noteworthy, not just because the company is No. 8 in the Fortune 500, but because its formal, once-a-year review ritual had been around for decades.
The yank-and-rank component–which resulted in a culling of the bottom 10th percentile–was scrapped around 10 years ago, but the system it was a part of had remained in force. Before the change, GE managers would meet with employees once a year for fate-determining evaluations.
Under the new system, GE is still relying heavily on managers, who meet with employees at the end of the year. The difference is that they’ll be guiding employees and coaching them on their path to meeting their goals under a much less rigid framework. GE is also rolling out an app for delivering more regular feedback.
Minneapolis food producer and distributor Cargill Inc. was struggling to engage and motivate its 155,000 employees worldwide. It became a true trendsetter in 2012 when it introduced its “Everyday Performance Management” system, designed to incorporate daily encouragement and feedback into on-the-job conversations. Cargill says it’s seen measurable improvements after managers began giving constructive feedback that was forward-looking, instead of reviewing what had happened in the past.
Eli Lilly, a Fortune 100 company that ranks as the ninth largest-grossing pharmaceutical company in the world, revealed some of its best practices for transforming performance management at the NeuroLeadership Institute’s annual summit.
Eli Lilly has long been progressive in implementing unique HR best practices and benefits, including job sharing and family assistance perks. In redesigning its performance management process, company leaders tried to adhere to the theme of “trust.” The new process is meant to empower employees to take more initiative and voice their ideas. Eli Lilly says that’s helping strengthen partnerships between supervisors and employees.
Probably one of the most talked-about cases in the spate of performance management revamps, Adobe has already generated the statistics to prove that regular feedback and check-ins make sense. The company has cut voluntary employee turnover by some 30% after introducing a frequent check-in program.
What’s more, Adobe reports that “involuntary departures” have risen by 50% because, according to SVP for people and places Donna Morris, the new system “requires executives and managers to have regular ‘tough discussions’ with employees who are struggling with performance issues—rather than putting them off until the next performance review cycle comes around.”
Accenture is abandoning the annual review in exchange for a solution that’s simply more accurate. As one researcher with the firm CEB told the Washington Post, reflecting on Accenture’s move, “Employees that do best in performance management systems tend to be the employees that are the most narcissistic and self-promoting.”
Accenture’s new model is designed to better chart the ongoing performance discussions between employees and their managers. Accenture had been quietly preparing to revamp up to 90% of its old methodologies with a new process it began rolling out in September 2015. The company is shifting focus to immediate performance development, rather than an annual forced ranking based on the past year’s metrics, and is using an internal app to help those within the organization relay feedback.
Google’s performance management philosophy has always been fairly nontraditional. Formal rankings have never been a part of the company’s process. Instead, employee goal-setting has been a part of Google’s DNA since the beginning. KPCB’s John Doerr originally brought a new style of goal setting, using objectives and key results (OKRs), to Google (from Intel).
Google managers continue to refine this approach to coach employees toward creating and achieving their goals. As Doerr told me last year, “It took a couple of iterations, but we figured out the right cadence and model, and to this day [at Google], Larry [Page, cofounder of Google and now CEO of Alphabet] writes his own personal OKRs and Google’s corporate OKRs every quarter.”
These six trendsetters have one thing in common: They’re all switching their focus from dictating what employees should do at work to helping develop their skills as individuals. As it stands, companies spend a significant amount of time on evaluation but comparatively little on development.
Yet it remains that human capital is every business’s greatest resource. The future of performance management will include more feedback and place a greater emphasis on development. And as employees become even better at their jobs, it’s a win-win for everyone.
Update: An earlier version of this article misidentified Brian Kropp, who commented to the Washington Post on Accenture’s policy shift, as an Accenture employee. Kropp is the HR practice leader for the research firm CEB. The error has been corrected.