Every year, like clockwork, management teams in companies around the world spend hundreds of hours putting together and communicating annual reviews to their team members. Studies show that managers spend more than 200 hours a year preparing, writing and sharing reviews with their reports. For every review season, that amounts to an average of 7.5 hours per direct report. From personal experience, I can attest that this can increase even more, especially for end-of-year reviews which tend to be more comprehensive.

Despite the colossal amount of effort, most employees and their managers do not feel they get the value they should from this process. Reports show that almost 95% of employees do not believe annual reviews are particularly useful. That’s a dire adoption statistic for a process that costs companies so much.

🤔 Are annual reviews even relevant anymore?

In 2020, annual reviews seem to be more out of touch than ever. All your employees, like the rest of the world, were affected in one way or another by COVID19. People spent most of the year being locked down, burned out and super stressed about the health of their friends and families.

On the other hand, the sudden switch to remote work makes rethinking your performance management methods more pressing than ever. Both you as a manager and your team need a way to align, prioritize and ensure you’re doing impactful work.

Before this bizarre holiday season is upon us, you have to ask yourself: Does it make sense to keep your regular annual reviews in 2020? How can you help your people, giving them direction and purpose, without them feeling like you’re judging their performance while they’re at their most vulnerable?

Many companies opted to omit reviews altogether this year. Others saw this as an opportunity to switch to another, more flexible way of evaluating performance, one that doesn’t try to cram everything into a single meeting once per year.

CPM as a viable alternative

CPM, which stands for Continuous Performance Management, is often touted as the modern way of evaluating the performance of knowledge workers. Companies like Apple, Google and others have moved towards CPM in their teams, making the switch to rigorous feedback and a more flexible review scheme.

Rather than focusing on an all-important meeting every six or twelve months, CPM is based on regular “check-ins”. These are monthly or quarterly meetings where you have the chance to work with your direct reports to evaluate past objectives and set new ones. Instead of giving actionable feedback just once or twice per year, you develop a more regular cadence of feedback loops, taking the time to talk about your report’s career development as well.

If you wish to try out CPM, I’ve prepared for you a check-in agenda template which you can use for your team. As you can see, it’s not very different from a 1:1 meeting agenda. A CPM check-in is just more focused on giving feedback, aligning on future objectives and identifying stretch goals that could help your reports evolve their skills.

💸 Compensation and performance, sitting in a tree

Switching gears in performance management brings up for discussion another pain point for many larger companies: should raises and bonuses be directly tied to the employees’ performance or not?

In his book Measure What Matters, John Doerr mentions:

For companies moving to continuous performance management, the first step is blunt and straightforward: Divorce compensation (both raises and bonuses) from OKRs.

It can’t be more straightforward than that.

To explore why it is problematic to keep performance and compensation discussions tied, start by asking yourself what you felt like during your previous review. You probably wrote a self-evaluation, showcasing the different positive outcomes of your work during the last year, and the ways you helped the company succeed. Then, your manager swooped in with their version of your performance review and proved each of your points wrong.

I exaggerate. However, keeping salaries and bonuses so close to performance evaluation discourages the exchange of open, honest feedback. Employees will hesitate to bring up areas of growth in their self-assessment lest they sabotage themselves, and managers will be hesitant with their praise because that likely means they’ll have to negotiate a raise for their report during tight budget times.

The objectivity of the performance review is also impacted. Since there are severe monetary implications to reviews, managers will avoid asking for 360 feedback from their direct reports’ teammates, who will, on their part, avoid giving corrective feedback and ruin the chances of their colleagues for a raise or a promotion.

If you’re thinking of overhauling your performance review process, it is an excellent time to start looking for alternatives to performance-based compensation as well.

🧵 To be continued…

In these tumultuous times (cliché, I know), annual reviews emerge as an antiquated method of evaluating performance. The minuscule returns do not justify the cost in work hours and resentment created. There are better, more practical ways out there to make sure your team members feel valued and effective, doing work that helps their company succeed.