Annual appraisals are dead, but where’s the replacement?

Arne Van Damme explains what alternatives HR professionals and line managers could consider away from yearly performance reviews

Saying the traditional review is dying is no longer provocative. Today, we in HR are all in violent agreement that a once-yearly confab is no longer a model way to manage people successfully… even if those that have made real changes tend still to be early-adopter types. 

As with the weather, we all talk about how bad the annual appraisal is but we don’t tend to do much about it. There’s a fear of going first, but the pandemic has given us a breather and necessitated change. So, what are we going to do?

Let me try to spell out my thoughts in basic terms. In order to create a more nuanced approach to gauging employee performance, HR chiefs first need to separate the related areas of salary setting and employee performance management. Salary and performance management are related, of course, but don’t tie them too tightly. If management/employee feedback is perceived as always moving the needle on salary then any such session becomes tense for employees. We need to build in slack between assessing/commenting and compensation.

But in other ways, some of the old ways of doing things aren’t so bad. A lot of my peers will tell you that we need to abandon approaches like setting bands but I disagree. You need a scoring system that can be understood and implemented by any manager. 

Another point: simplify. You need managerial tools for guidance but often they’re mixed up in a bunch. The trend should always be towards using the tools that make sense for you and there’s no need to embrace everything in the toolkit. 

You’ve got rhythm 

Consider spreading out the process because people change, circumstances change and business is faster and more unpredictable than ever. 

The answer lies in more regular meetings, but how often? Try and see what works but a quarterly one-to-one manager-to-employee cadence appears to be a decent compromise between reviewing and getting the job done. More frequent meetings might appear like breathing down employees’ necks.  

The salary elephant on the table

By all means, assess people on potential as well as performance, but don’t shy away from salary-based differentiation for top performers. Your salary is your scorecard in life, to paraphrase Silicon Valley pioneer Jerry Sanders, and there’s no shame in differentiating between your best people and the rest of your people.

That’s not to say that salary is the be-all-and-end-all of the rewards system, but giving praise and motivating should be the table stakes of management, while working hours flexibility and choice of tools are peripheral perks. 

The tools to do the job

HCM tools can underpin employee performance and rewards but some have become gimmicky, which in turn means they have been relegated to pilots and pockets of the enterprise. Many of the best-known modern tools have been hard to implement. 

Managers still want simple ways to analyse performance and employees rarely feel that these tools have been built with their needs front of mind. There has been lots of talk about bringing social experiences to HCM, but less hard evidence of a look and feel analogous to a Slack, Facebook or Google.

Best practice remains in the fundamentals of getting managers and others to score employee performance via surveys or other simple means. After that, it’s up to you whether you deem it wise to share that information with the employee: in a start-up it’s probably not necessary, but in larger enterprises it may well be deemed appropriate.

Continuous engagement is a state-of-the-art approach whether you follow an employee success template or not. It will help to provide a live understanding of what’s happening that can shape adaptations. You may need to communicate strategy more or less but, if you’re not listening and tracking, it won’t get counted. 

There are bad ideas to avoid too though, and the biggest of these is doing nothing and thinking that’s the safest approach. Another is to give managers a fixed budget and let them smear it on pay like peanut butter. You need structure and a strong idea of who your top people are.

We see it every day: 48 per cent of companies we surveyed conduct three or more meetings yearly with employees, leading to employees feeling valued and better coached. And during the pandemic we have seen companies dynamically change their approaches. Belgium’s Eurofins, for example, has moved to weekly ‘pulses’ or check-ins to maintain employee support and inspire motivation. Now more than ever we need to think about our people, how we talk to them and when we talk to them.

Arne van Damme is an HR futurist at Unit4