Gruntled Employees

The dumbest managerial tool: annual performance reviews

A recent article in The Wall Street Journal discusses some of the problems with annual performance reviews and how a few companies are abandoning them. In the article, ("Performance Reviews Lose Steam," Dec. 19, 2011), Rachel Emma Silverman mentions that even HR professionals recognize the flaws in the system:

Performance reviews have long received poor grades, even from those who conduct them. Nearly 60% of human-resources executives graded their own performance-management systems a C or below, according to a 2010 survey by Sibson Consulting Inc. and WorldatWork, a professional association. And one academic review of more than 600 employee-feedback studies found that two-thirds of appraisals had zero or even negative effects on employee performance after the feedback was given.

Silverman writes that about one percent of companies are ending the practice, citing a report of the Corporate Executive Board. Well, it's a start, I guess.

In Chapter 8 of Firing at Will, I discuss annual performance reviews at length, calling them "the dumbest managerial tool." Here's why:

First of all, emphasizing that employees’ performance should be measured on an annual basis suggests that there’s less reason to measure it on a more-frequent basis. That’s insane. First of all, who can possibly remember how a particular employee was performing ten or eleven months ago? So what ends up happening is that the past month or two get undue weight in the “annual” evaluation.

Second, if the purpose is to correct poor performance or behavior, why would you wait till the end of a year to do that? Performance and behavior issues need to be dealt with when they arise, not saved up till the end of an arbitrary twelve-month period. Similarly, if the appraisal is intended to reward good behavior or performance, why in the world would you wait? “Hey, Alice. That thing you did back in March was terrific. Way to go.” Alice: “Huh?”

Third, if the purpose is to tie the evaluation to a decision about a possible pay increase, that’s also foolish. In a well-run and well-managed company, pay decisions should be made on the basis of the employees’ individual contributions on an ongoing basis, not based on the mere fact that they avoided attrition for another calendar year.

My fourth problem with the annual basis is that managers tend to blow it on the timing. I always did. An evaluation that was intended to go out in early January would just as likely get finished in late March. That’s normal, because managers usually have more-important managerial tasks to accomplish, like running the actual business.

The problem is, if you tell your employees that you’re going to do annual performance appraisals in January, they’re going to expect to receive them in January, along with some sort of a pay raise. When January slips into February and then March finally comes around, those employees are going to be unhappy with you, even if they know you’ve been busy doing real work.

Companies end up using performance reviews as a crutch in place of actually managing their employees real-time. In fact, the reviews do more harm than good. Don't be part of the 99%. Get rid of annual performance reviews, and instead teach your managers to manage.

A Lousy Christmas Present

From Firing at Will, Chapter 6, "How to Fire an Employee":

One consideration that’s worth keeping in mind is the broader time frame. For example, it’s never a good idea to fire someone right before Christmas. That then becomes the story: “Those bastards fired me two days before Christmas.” That never sounds good, and it may actually increase the risk of a lawsuit.

Other days to avoid: The employee’s birthday. The day after her mother dies. The day after the Red Sox win the World Series. The basic rule here is this: be sensitive about the timing, but don’t worry about the “rules” about times and days. 

Throughout the book, I talk about the need to fire a problem employee once you know that he or she is never going to work out. But there are exceptions, and Christmastime is one of them. Yes, I know it's the end of the year, and maybe there are tax or accounting implications. But don't do it. Either plan ahead and do it in November, or wait until a couple of weeks into the new year. Don't make the story "I got fired at the holidays."

Speaking of holidays, it's not too late to get a copy for your managerial loved ones' digital stockings. You can pick up the Kindle version here and the Nook version here. And if you want to go old school, the paperback version is available from Amazon here.

Managing face to face

New Red Sox manager Bobby Valentine, speaking on WEEI's Mut and Merloni Show about why he prefers talking to his new players in person instead of over the phone:

'Talking on the phone is only one step up from communicating by a letter or Twitter or the Internet,' he said. 'There’s nothing like — you know what I mean by this, Lou — talking with your body and your heart and your eyes and your hands, as we Italians do. I think most of the communication has been a cordial one, one that says I’m really looking forward to really establishing a line of communication and really working and really enjoying and and trying to find what I could do to make these guys as good as they can possibly be.'

Frankly, it has nothing to do with being Italian. Almost everyone communicates more effectively face to face than over the phone (and even more so compared to email or letter). That's because human beings take in a ton of tacit information by seeing facial expressions and body language. Employees are less likely to misunderstand your words when delivered with the context of these nonverbal cues.

All managers should listen to Valentine here. Whenever possible, talk to your employees in person.

via fullcount.weei.com

Millennials don't want 9 to 5

Dan Schwabel writes at TIME.com that millennials are forcing employers to think differently about how they structure the workforce:

Aside from the early adopters of workplace-flexibility programs, many other companies are hesitant because of the traditional “command and control” approach laid out for older generations. The challenge these companies face is letting go and trusting their young employees — even when they are telecommuting or using Facebook regularly at work.

Many companies fear that, without structure, employees will be distracted, not as engaged and less productive. In fact, the opposite is often true. A trusting work environment breeds more-loyal employees and increases efficiency.

via moneyland.time.com