It’s soulcrushing. Painful. Antiquated. Just Some of the Reasons Why More and More Companies are Abolishing the Annual Performance Review

17 Mar

Post by Expedite

Posted in: Business Development Consulting, Human Resource

It’s soulcrushing. Painful. Antiquated. Just Some of the Reasons Why More and More Companies are Abolishing the Annual Performance Review

Andre Norman

Soulcrushing. Painful. Boring. Antiquated.  These are just some of the words Adobe’s employers used to describe their Annual Performance Review process when Donna Morris, (then senior vice president of Human Resources at Adobe Systems) asked for their feedback on it. She’d had a hunch that it hadn’t been working for some time. But it was back in 2012 that this hunch took on a life of its own, when she talked with a reporter from India’s Economic Times, during a visit to the company’s offices based there. During this interview, the words – “We plan to abolish the annual performance review format” fell out of her mouth. Although a little premature and something of a shock for the Adobe team to see the headline splashed across the front of the pages the next day, it kickstarted a chain of positive events that have benefitted both the company and its employers ever since – leading them to declare that they would ‘never go back’ to the old system.

And why would they? You need only look at the business figures to see the difference. Since 2012, stock share prices have leapt from 20 dollars per stock price to 120 dollars – a huge leap. And 80,000 hours of form-filling has been replaced with lower attrition, better engagement and higher performance management, which are all clear signs of happier employers.

Why and how did it have to change? What was so bad about the previous system? Andre Norman, Director of Shared Services and Mat Lowery, Director of talent development  discuss.

They both describe it almost as a sleepwalking experience for both employee and manager – a zombie process that was serving neither party.

Andre says: “There were many different problems identified that led to it being ditched. There was a tendency to abdicate responsibility to HR each year and wait until problems needed to be solved and looked at until the performance review.” He adds: “In reality this just doesn’t work as so many changes within a year as objectives change day to day, and there are always different challenges to incorporate – for example, this year we acquired a new company.”  Interestingly, this reflects the thoughts of many office workers. In an Adobe survey of 1,500 employees across the US, they found that 4 in 5 prefer feedback in the moment, rather than aggregated over a period of months.

There was also a long process of submitting accomplishments, soliciting feedback, and writing reviews. In particular, employees complained of an onerous process of rating and ranking with each employee determining salary increase and equity. This was also reflected in preferences from the survey that found 6 in 10 office workers want qualitative feedback instead of numeric ratings.

In addition to this, feedback sessions were inconsistent, with a spike in employee productivity at the end of the year that only timed with performance review discussions. The HR team managed paperwork and processes to ensure all steps were completed and manager coaching and resources came from HR partners who couldn’t always reach everyone.

Mat says: “I think one of the most important learning points surroudning this is that even when people know something is broken, they fear what comes next or what will replace it. It can be a difficult transition for people.”

For Adobe, abolishing the annual performance review did not herald the start of its fall into the abyss. Indeed, The Indian Times article was something of a catalyst for Donna and the team – they began to quickly draw up a replacement, which they simply called ‘check in’. And simplicity is one of its most popular features. As Andre and Mat explain: “The opensourced check in process is not hugely sophisticated – at the heart of it are clear expectations – it’s simple by design and the onus is on the manager and employee to drive it forward.” They add: “Ultimately, it’s about trust.”

In place of the annual performance review, priorities are discussed and adjusted with the manager regularly. There is an ongoing process of feedback and dialogue with no formal written review or documentation, and no formal rating or ranking. The manager determines salary and equity annually based on performance, and is accountable for the amount of money that is allocated.

Feedback conversations are expected quarterly, with ongoing feedback the norm. Consistent employee productivity is based on ongoing discussions and feedback throughout the year. And rather than ‘policing’ the process, the HR team equips employees and managers to have constructive conversations, with a centralised Employee Resource Centre that provides help and answers whenever needed.

And it’s this simplicity that helps the process work across EMEA and 24 countries in many different departments – from technical to research and development centres, through to sales.

Deloitte is another company to famously abolish the annual performance review. More and more are following suit.

If companies are to continue to attract Millennials, the elusive Holy Grail of the talent pool, some might say, then abolishing the annual performance review would be in their best interests. Adobe’s employment survey found that 73% of Millennial managers say reviews negatively impact their ability to do the rest of their job, while 68% say they’re not effective. And interestingly, Millennials are more likely to cry after a review, look for another job or quit. So, if you have doubts regarding how much annual performance reviews actually achieve, it is worth taking those first few audacious steps towards change.

Register for Working Futures to meet Adobe’s Mat and Andre, and find out firsthand how Adobe’s simple check-in process has transformed the organisation.