Will The Great Resignation Signal an End to The Annual Performance Evaluation? By KEVIN CLEYS and KATIE TOWERY
We are all familiar with the annual performance evaluation process. It has long been the standard across various industries and with employers of all shapes and sizes. However, in 2021, on the heels of what has been deemed the “Great Resignation,” when retention of talent is increasingly difficult for employers, is it time to rethink the approach? Those who have been in the workforce for some time are certainly familiar with the typical process. Once a year, or perhaps every 6 months, employees are provided with a written evaluation of their job performance during the preceding review period. In most cases, the employer provides a review using standardized forms, and the employee participates in the process—employee receives the performance evaluation from their direct and/or next-level supervisor, employee reviews the evaluation, and employee meets with their evaluators for one-on-one feedback regarding the comments and suggestions for improvement. Sometimes, the employee is afforded the opportunity to “self-evaluate” before or after receiving the evaluation. Importantly, the performance evaluation process can be tied to compensation adjustments, including performance bonuses and raises. Ideally, there is an undeniable objectivity to this customary approach, utilizing standardized forms and following a standardized process, which many employers like because it can mitigate the risk of claims by employees of disparate treatment. Further, because this approach typically occurs on predetermined dates, the employer can schedule the evaluation process for “slow” periods during the year when it will have a more limited impact on productivity. Finally, the intended impartial nature of the approach makes it more manageable for larger employers and provides a (relatively) objective metric for determining employee compensation. However, the annual performance evaluation is not without its drawbacks, many of which have come to the forefront in the context of a remote workplace. First, the annual nature of the evaluation process often suffers from recency bias – i.e., the evaluator’s comments tend to focus on the employee’s recent performance, rather than their performance over the entire period. This can lead to skewed evaluations that are not, in fact, reflective of the employee’s overall contributions to the company. Relatedly, if management waits until days before the deadline to complete evaluations, and then rushes the process, this can lead to cookie cutter assessments that are of little use and, worst case, can set the company up for problems down the road (i.e., bad performers with “acceptable” reviews). 40
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Furthermore, annual performance evaluations tend to negatively impact employee morale. This is particularly true if the employee does not have a strong relationship with, and therefore a lack of confidence in, their evaluator—which, due to the transition to teleworking and corresponding decrease of face time with supervisors, has increased in the past 18 months. Relatedly, if evaluations are only provided once a year, and thus take place weeks or months after certain events have transpired, the comments can be interpreted as judgmental rather than constructive attempts to coach the employee on how to improve performance. Similarly, if an evaluation is only provided annually, it can be viewed as a grading mechanism, as opposed to an opportunity for improvement. During the current once-in-a-generation recalibration of the workplace, and with changing expectations for the employer-employee dynamic, the potential drawbacks of annual performance evaluations, and in particular the detrimental effect on employee morale, make it abundantly clear that employers may wish to consider reevaluating their approach to performance evaluations. So how can employers constructively assess their employees’ performance in a manner that could aid in increasing retention, while also incentivizing employees to stay engaged in the workplace?
Building a New Process Before rolling out a new performance review process, employers should keep a few key points in mind. First, the new approach needs to be clearly communicated to employees. They shouldn’t be left guessing what the new program’s objectives are, or how they will be assessed under the revised structure. Second, let employees know that the fresh approach is being implemented to better serve the company’s values. By tying performance reviews to principles such as collaboration, teamwork, and growth factors, employers will provide employees with a sharper understanding of how their performance will be measured long term, what the overall ambitions are for the organization, and, perhaps most importantly, how the two are linked.
