In 2015, Deloitte revamped its performance management system after revealing they were spending nearly 2 million hours a year on its review process. Accenture learned that only 25% of the review process was talking with employees vs. about them. Ready to scrap the old review process? Here’s how…
It’s easier to toss something out than to decide what to put in its place. Facebook stuck with a more formal, biannual review process, after an HR audit a few years back, in which ratings are directly tied to pay. The process starts with a self-evaluation, then every employee can nominate three to five peers to review them. Next, managers write up the performance review and come up with a rating by comparing evaluations for employees in similar roles and levels, to “normalize for people who may be hard graders or easy graders,” says Janelle Gale, Facebook’s VP of HR business partners.
Once the rating is in, the manager has no control over compensation, Gale says. Employees get paid a predetermined sum associated with each rating—a system that applies not just to base pay, but also to bonuses and equity. This helps spare employees from getting “black box” ratings by the powers that be, without any say in the matter, Gale explains.
Not everyone is rethinking existing ratings systems, though; some are even adding them for the first time. Education startup Quizlet added them in 2016. Suddenly, employees who’d been around awhile were clamoring for performance reviews, hoping it would add some clarity to their career paths at the company.
“It was pretty shocking for me to hear that people were asking for a formal performance management process and wanted to make sure that their progress and growth in their roles was documented,” Aisha Stephenson, VP of people operations, said. Quizlet’s team had no trouble getting behind the idea, Stephenson explained, but wanted to make sure it wasn’t too “corporate.” So they put in place a combination of self, peer, and manager reviews instead of the standard, once-a-year-by-your-boss model.
2. USE PEER RATINGS
Facebook is hardly alone in turning to peer reviews. Berlin-based education startup CareerFoundry took that idea and ran with it, making its review process exclusively peer-based. After a round of Series-A funding last year, CareerFoundry grew rapidly from about 15 to 50 people, and it was then that employees actually requested reviews. The company’s peer review process occurs twice annually, and reviewers evaluate each other based on six questions. In addition, CEO Raffaela Rein and her cofounder fill out evaluations for all their employees.
Rein has found that people were more inclined to take input from peers seriously. “They are the ones working together every day, so there’s no hiding,” she says. “Sometimes, if only the manager gives feedback, then you only work hard while he’s there.” Facebook has discovered much the same thing. Peer reviewers aren’t obligated to share their input with the person they’re evaluating, but Gale says 70% of employees still choose to do so.
3. DISCONNECT REVIEWS FROM PROMOS & PAY
Not many companies have totally divorced performance reviews from compensation and promotion, but a few have tried to keep them a little more distinct. CareerFoundry conducts “peer promotions” in a process separate from peer performance reviews. Employees simply vote on who they’d most like to see promoted, and while this process has only been in place for the last two quarters, Rein says she’s already promoted the most voted-for nominees—eight in total—without hesitation.
“I think people were like, ‘Wow, we’ll handle that responsibility with honesty and integrity.’ It was very positive,” Rein says. “
Sift Science requires performance reviews to take place at least once a year, but teams can choose to do as many of them as they like whenever they want; the goal is to keep promotions separate from the review process. Health marketing agency Klick Health started doing something similar after CEO Leerom Segal swapped performance reviews for weekly feedback sessions as early as 2013. Promotions and compensation now get addressed individually in yearly meetings.
“Our philosophy is that [promotions] should not happen at any one particular point,” says Sift Science CEO Jason Tan. “It could be driven by a performance review, but it shouldn’t have to be.”
4. MAKE INFORMAL FEEDBACK MORE MEANINGFUL
Companies that throw out performance reviews don’t always find that informal check-ins lead to fairer, better feedback. “The goal is very admirable,” says Rebecca Zucker, executive coach and partner at leadership development firm Next Step Partners. In theory, she agrees that “feedback shouldn’t be an event in and of itself.” But scrapping reviews doesn’t always lead to effective “ongoing conversations about performance.”
As Zucker explains, giving and receiving good feedback is a skill—one that takes time to develop. Without it, “feedback either doesn’t happen or doesn’t happen well.” Many of the people I spoke to said they hired leadership coaches like Zucker for exactly this reason, knowing that without skillful feedback swapping, replacing formal reviews with informal check-ins wouldn’t make a difference.
Warby Parker is also known for its weekly happiness ratings, where employees rank their happiness during any given week on a scale of zero to 10, a process that forces conversations between managers and employees. “I joke that feedback is a gift,” Warby Parker co-CEO Neil Blumenthal says. “It’s the opposite of revenge—it’s best served hot.”