Performance management strategies of the past focused largely on annual employee performance reviews to determine compensation and rate of upward trajectory within the organization. A typical stack-ranking system rated employees’ performance along a bell curve, pitting colleagues against each other in the coarsely-termed rank-and-yank system which culled underperforming individuals on the “wrong” side of the curve. In 2018, this antiquated model of performance evaluation has become obsolete.

Disrupting performance management

Performance management is switching gears. In the face of the influx of Millennials into the workforce, companies are adapting to Gen Y’s desire for opportunities for growth, clear expectations, and a transparent communication flow. Annual appraisals are being replaced by continuous performance management, a process involving regular check-ins, real-time feedback, and agile goal management. And given that the cost of lost time spent on traditional employee reviews ranges from US$2.4M to $35M annually (for U.S. companies with 10,000 employees), saying good riddance to annual reviews is the smart choice on many levels.

The shift away from annual reviews and ranking systems to a continuous feedback model improves productivity, performance, employee engagement, and staff retention. For example, Adobe experienced a 30% reduction in voluntary turnover when they abandoned annual reviews in favour of frequent performance discussions. Research by the NeuroLeadership Institute found that 90% of companies experienced direct improvements in engagement after implementing a continuous performance management model; a Gallup report noted that increasing the frequency of meaningful feedback can boost engagement threefold. Plus, ninety-one percent of companies that have adopted continuous performance management have better data for decision-making.

Making the shift to performance development

Millennials place a great deal of importance on personal and professional growth on individual, team, and community levels. They value learning and development opportunities, crave meaningful work and a sense of purpose, and thrive on regular communication with team members and leaders to help them grow within the organization. In response, traditional performance management (PM) is shifting to employee performance development (EPD), an approach based on coaching employees to set and reach goals, using consistent feedback to achieve clear objectives, and fostering a sense of accountability.1 As noted in a recent Entrepreneur article, by creating a culture of learning and development and creative thinking—as opposed to relying on top-down, intermittent monitoring of employees—companies can promote the continuous improvement of business processes and of individuals’ skills, behavior, and contribution.

In an effort to implement continuous performance management strategies, companies are turning to PM/EPD tools and technologies to collect real-time feedback, communicate seamlessly and consistently with team members, and set and track goals. And by integrating a PM/EPD application with their HRIS platform, managers can not only better appraise, understand, and motivate employees but they’re able to gather higher-quality data to help identify high performers, inform compensation decision-making, and quickly address obstacles to performance and growth.

Has your organization replaced annual reviews with continuous performance management yet?

Get more insight into how HR professionals are redefining performance management and the employee experience in our latest ebook: The Future of People Management in the Digital Age, Part 2.


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