Why you should scrap annual performance reviews in your business

If Daniel Pink had his way, businesses would do away with the practice of only reviewing an employee’s performance once a year.

According to the best-selling author and speaker, employees are motivated at work when they make progress. But making progress or getting better at something relies on feedback.

“I want to make the case to you that the workforce, especially in large organisations, is a feedback desert,” Pink told attendees at the recent Future of Work conference held by the University of Melbourne’s Centre for Workplace Leadership.

Read more: How to motivate your staff: Top tips from Daniel Pink

Via a video-link up from Canada, Pink told the conference attendee businesses such as Adobe had recently scrapped annual performance reviews in favour of more regular forms of employee feedback.

And he says you should consider scrapping performance reviews in your business as well.

Millennials and annual reviews don’t mix

Pink said only reviewing an employee’s performance once a year is at odds with younger generations of workers.

“Think about a Millennial, someone who is 30, who was born in 1985,” Pink said.

“They were probably using a personal computer in elementary or primary school. They were almost certainly using the internet in high school. If they went to university, they were definitely using the internet at university. They have probably played games on consoles of mobiles their entire lives. They are totally comfortable all the time using text messages.”

“If you think about what a Millennial’s life is like, their world is awash with rich, regular and robust feedback,” Pink added.

For people who have grown up in a world where they press and button and something happens—where “rich, regular, personalised feedback is the oxygen they breathe”—Pink says entering a work environment where the only chance they have to get feedback is every 12 months is demotivating.

“We say we know the rest of your life for your entire existence has been full of rich, regular, meaningful, personalised, customised, relative feedback, we know that it’s the air that you breathe, we know that it’s meaningful to you and you don’t know a world any different to that. However, once you come through the doors here, it’s kind of an alternative universe because in here we give you feedback once a year in an awkward, movie theatre-style environment with your boss,” Pink said.

“It is completely antithetical to a generation’s experience and to this most important piece of feedback in town that has to do with mastery and making progress.”

A better way of reviewing

So what is the alternative?

“The big idea is that what you want to do is you want to look for ways to make inside an organisation as rich in feedback as life is outside of organisations,” Pink said.

“You want to increase the metabolism of feedback within organisations so it at least becomes close to the metabolism of feedback outside of organisations.”

Pink gave the conference one example of a business that has increased the metabolism of its feedback for employees: Australian tech success story, Atlassian.

According to Pink, Atlassian has pioneered a form of employee performance reviews that he calls “weekly one-on-ones with a twist”.

The model is based on a weekly catch-up between managers and employees. For three weeks each month, the catch-up is simply to check in with what the employee is working on and if they need any help or guidance.

But on the fourth week of the month, the catch-up is dedicated to a particular topic.  For example, the managers might ask the employees to tell them what it is they love about their job. The following month, the catch-up might be about what barriers the employee encounters in their job and how the manager can help remove them.

“The next month, you have three check-ins and then [in the fourth week] you say ‘let’s talk about your career long-term’,” Pink said.

Pink said this is just one way of increasing the level of personalised feedback within a business.

“What I like about this is … it has a faster metabolism and what we have to get away from is feedback systems that are sluggish and formal to feedback systems that are like everything else, that are actually pretty swift and informal,” he said.

Making the change in your business

Ben Watts, director of wattsnext HR, agrees with Pink that once-a-year performance reviews are an outdated way of managing employee performance.

“The worst thing about annual reviews is they only ever assess the last six weeks of work,” Watts told SmartCompany.

“It’s quite unfair because people only ever remember what has recently happened and there may be a lot of great projects that don’t get recognised.”

Watts says wattsnext HR has worked with a number of clients to roll out a program developed by an academic called Dr Tim Baker, which is based on a monthly, informal conversation model between managers and their staff.

“It encourages two-way feedback between the employee and manager,” Watts says.

“More than anything, it teaches managers how to manage.”

While Watts says monthly catch-ups work particularly well for managing employee performance, for some businesses quarterly catch-ups make more sense.

“At the very least you should be doing it every six months,” he says.

The most important thing is to catch-up with employees regularly and to make the meeting a conversation.

“The old-style performance reviews were usually about managers tell you how you’ve gone over the past 12 months and that was why there was this whole fear about it,” Watts says.

“But if you catch-up more often you can get feedback along the way and you have the chance to make adjustments and improve.”

But Watts recommends always keeping discussions about salary or wage increases separate from performance reviews.

“Have a separate meeting at least a couple of months apart,” Watts recommends.

“It can take the focus off the feedback,” Watts says.

“Performance reviews can be a chance to help develop an employee and that can get lost.”

At wattsnext HR, Watts and his team practice what they preach by holding an informal catch-up with staff each Friday afternoon. It’s compulsory for all team members to attend but they do get to enjoy some drinks and nibbles too.

The meetings are called “Share and care” and one of the senior members of the wattsnext team will lead the discussion about the week, reflecting and celebrating any wins.

“It’s an informal way to communicate and celebrate our wins together,” Watts says, adding that it is especially important for introducing new staff to the team.

“It is about building culture.”