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Abolish performance appraisal? Bad idea!

In recent years, newspapers were regularly filled with texts such as, “Abolish the performance review.” In this blog, we’ll explain why that’s a bad idea.

The performance or appraisal interview is often part of a traditional HR interview cycle. The origins of this cycle date back to 1920, so we at Learned thought it was time to take a critical look at the traditional appraisal interview within the performance management cycle. Let’s start with the most commonly heard objections from the employee side:

  • The performance/assessment interview is seen as a “must”.
  • The appraisal interview is all about financial reward.
  • The appraisal interview is perceived as unfair. Research by Kilian Wawoe (VU, 2017) shows that employees feel that the way appraisals are arrived at is not fair and can only be traced to a small extent to actual performance.
  • The appraisal interview does not give attention to the employee’s talents. An article by HR Practice (2018) shows that only 15% of employees feel that the interview matches their skills.
  • Finally, a whopping 66% of employees report that an annual interview cycle lowers their productivity.

 

However, the problems go a step further. Management and HR are also dissatisfied with the current method of assessment in the traditional hr cycle:

 

  • 90% of HR managers report that the appraisal interview lacks qualitative information.
  • 95% of managers say they are not satisfied with the annual interview cycle.
    A manager with a team of 8 employees spends an average of 220 hours per year on the interview cycle.

 

Why not abolish but renew?

The obvious solution: abolish it. We say: not abolish, but renew. In fact, Gartner research shows that companies that do away with the entire performance or appraisal interview see a drop in employee engagement of up to 6%.

  • When the “need” for managers disappears, managers actually coach less and therefore do not coach more.
  • In the absence of a structured conversation, the quality of conversations between the manager and employee decreases by as much as 14%.
  • The decrease in call volume and drop in quality results in up to 10% lower employee productivity.

Forward-thinking companies such as Microsoft, Deloitte and Accenture have since taken a different approach. These companies have not simply stopped assessing; rather, they have looked at an appropriate alternative method of assessment (Volkskrant, 2015). At Accenture, for example, they switched from a method that only measured performance to one that also focused on behavior and trust (Parool, 2019). In short, abolition is too short of the mark. We do need to continue to judge, but just a little differently.

In conclusion, then, modern management also requires a modern conversation cycle for creating productive and engaged teams.

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