Deborah Huyer Answers Follow-Up Questions from “Death of a Dinosaur: The End of the Annual Performance Review”

Letting go of the cheese

I am asked, “Can companies keep the annual review while they move to a coaching process and culture?” For those of you who have read “Who Moved my Cheese?” you can’t get your new cheese until you let go of your old cheese, so that answer is – no. This is true for many reasons.

As part of my research I interviewed managers, directors and execs. Some of the questions I asked were, “What do you get from doing an annual review? Why do you do them? What value do they provide?”

One COO summed it up. He said, “It forces us to have these kinds of discussions with our employees once a year.” And he was serious. And that is what is happening.

As long as you have the annual review as a fall back, you will not fully integrate performance management as an integral business process, because you’ll always have the annual review to fall back on. It becomes a crutch. Once you take away that crutch, it forces you to focus on performance throughout the year. It’s basic change management. You can’t straddle two processes, you have to commit. Once you go through 6 months to a year of organizational coaching, the annual (or semi-annual review) becomes irrelevant and obsolete. There would be no reason to do one.

What about ratings for compensation decisions? What about documentation?

Compensation decisions are usually done via Excel spreadsheet. A VP or Director gets a % or $ amount based on the economic situation of the company to distribute to their department. Allocations are based somewhat on performance, but usually around market pay for the position, where an employee sits in the salary range, how long have they been in the role, additional responsibilities, or if they want to retain an employee. With merit budgets in the 3-4% range, there is very little real differentiation for performance. If you are following the coaching process, you don’t need to do a separate review to know how your employees are performing, as you are continually assessing how they are doing against their goals throughout the year.

At the end of the year, you would not (should not) have any underperformers, as performance issues are dealt with throughout the year and changes are made earlier (unless it is a brand new employee), rather than waiting until the annual review and then putting someone on a performance plan. Are managers willing to let their employees underperform until it is review time? It comes down to who’s performing well and who’s performing exceptionally well, and you would already have that information.

As far as documentation for an employment decision, you have 40+ weeks of feedback, goals, commitments, and results captured in a pre- and post- meeting form that the employee completes. That is the best documentation you could possibly have on performance, which spans the entire year – not something you are trying to pull together at the end of the year.

What if we are not ready to give up the annual performance review right now? What can we do to improve our performance management processes?

You should consider organizational coaching, even and especially if you retain an annual performance review. This is where most performance management falls down. You assess, you create development plans, and you forget them until the next review, or you try to include performance goals in your 1:1’s, but managers are ill-equipped to coach their employees. Many think of coaching as remedial and are uncomfortable with it. Some are still caught up in command-and-control, which is a good way to lose valuable employees. Most just don’t know how, and have never experienced a successful coaching relationship themselves. If managers are trained and have experienced a coaching relationship, it moves from remedial to transformational. And many really like the new role of coach. Some of the most successful managers that I know today are being coaching themselves, have had coaching training, and are actively coaching their employees. Organizational coaching can be the next step in your evolution if you are willing to take the big step.

What if an employee is not owning their review or development?

That can and will happen, but if it is an expectation of all employees, then it becomes and is treated like any other performance issue where the manager plays a more active role. And in a coaching culture, those conversations come up sooner rather than after the end of the year, so you can make course corrections as needed, rather than waiting for a formal review process.

Imagine – through laser questioning, interviewing, and hiring employees who are driven to self and continuous improvement. Isn’t that the type of employee most companies want to hire? It all starts and ends with whom you hire. But that’s another workshop…

Now imagine setting the expectations with your new employees through your employment branding and on-boarding process. Imagine that at XYZ Company, the employee, not the manager, owns their review and development process. The employee is responsible for soliciting meaningful feedback and creating goals for themselves. Here is the process and the tools and your manager is there to help coach you to success.

What if a manager does not want to be a coach?

That also can and will happen. Sometimes a manager only knows the command-and-control approach to management; most of the time they just don’t know how to coach. Once again, it comes down to actually experiencing a successful coaching relationship themselves. Once they see how it can work, many find it very liberating and enjoyable. Many enjoy it because it is not punitive and remedial, a role that most managers are uncomfortable with.

Some managers enjoy command-and-control and don’t want to change. That’s a decision you need to make. Do you want that type of management style in your organization? The new business environments don’t support it, but you have to make that cultural decision.

And then there are the managers that, despite their best efforts and training, just don’t have the interpersonal skills to be a great coach, but they are a valuable member of the team and support the process. In that case, companies employ either external or internal coaches to provide that role. For example, Cigna employs 22 internal coaches. Whether you have internal or external coaches depends on the size of the organization. The expectation is that the managers are still being coached themselves, but their employees meet with a coach weekly or bi-weekly, and then meet with their managers once a month to recap their progress.