Is Annual Performance Review a waste of time?

Recently someone forwarded me this post about the fact that Performance reviews are a big fat waste of time. This is a long post talking about why it is so and proposes that we should just lose them. Here are the reasons the post mentions as to why this is the case:

• Everybody hates them
  
• They try to do too much
  
• They become an excuse for not talking for the rest of the year
  
• They are too structured and formal
  
• They focus too much on the quantifiable
  
• They may not be formally connected with promotions and salary negotiations – in reality everyone knows they are
  
• No one says what they really think
  
• They take a LOT of time
  
• They become a crutch for bad managers
  

The post really set me thinking about my previous experiences in administering and receiving performance reviews. Annual reviews (and semi-annual in some cases) in my experience have some positive aspects too:

1. It forces you to retrospect the year (or 6-months) gone by. This is a hard work and different people devise different ways of doing it successfully (reviewing their mails over the past review periods, keeping notes, asking others, etc), but this forcing function helps you take a broad look at your accomplishments and shortcomings over the period.
2. Even though reviews try to quantify things, it is not necessarily a bad thing. This again forces us to think hard about our performance on one aspect relative to other aspects (for ex, it is important to know whether I performed better at managing a team or at delivering a presentation to executive team, and the scale of difference). Again, this is hard work but very important for the person him/herself.
3. Since the reality is that my visible growth (raises, bonuses, promotions) are tied in some way to my performance evaluated via this process, this gives me a chance to influence those decisions by providing as much information as I can.

However, it is very easy to do a very bad job in administering and receiving a performance review and based on the comments on that blog, it seems most people do a bad job than good!

To make such a complex process work well, there are equally important processes and steps that need to be done well. Annual performance review process cannot and should not stand out as the only process catering to performance management. Here are some of the related processes which make or mar the annual performance review process:

1. Talking (1-1s): I can’t stress how critical good 1-1s are in the whole scheme of things related to performance management. 1-1s accomplish 3 specific things which are crucial for the success of performance review:
   1. They create the trust and mutual respect that are needed for a performance review meeting to work. You don’t want to hear a phrase ‘need improvement’ from someone you do not trust and respect.
   2. They provide the ground for collection and dissemination of information so that annual performance review meeting doesn’t get overloaded with everyday details and can focus on broad perspectives on individual performance.
   3. After performance review process is completed, 1-1s are the right (and probably the only) place to follow-up on the areas of improvement identified and track the progress till the next performance review cycle.
2. Transparency: It is essential for a manager and the company to share the details of what is expected from the performance review form and how the information will be used. If this is being used directly for salary changes, it should be said so. If this is one part of equation for salary changes, mention that (and also mention what are other parts of the equation). The management team MUST come across as fair for this process to work well. When employees do not trust the company to do the right thing, they do not care about what they capture in these forms and then this process becomes a huge burden.
3. Training: I can’t stress how important it is to train employees and managers to do this process well. I have seen numerous performance reviews which if believed would make this person’s accomplishments greater than Bill Gates! And I have seen numerous ones where employees write 1-liners against the goals and still rate themselves 5 out of 5. Having managed managers, I have seen many managers providing incomplete, incorrect, and unrelated, and unfair comments to employees’ comments. These happen because it is not easy to intuitively understand what needs to be captured in a performance review process, and also because companies differ in their expectations and goals, and hence your intuitive understanding of the process in one company can be a laughing stock in another company. Employees must be trained on how to write accurate and precise comments, managers must be trained to provide specific and contextual feedback, and both of them need to be trained on creating SMART goals against which performance should be measured.
4. Tools: Tools are very important in this process too. Some of the shortcomings mentioned above can be mitigated by using good tools. For example, recent performance management tools on the market allow you to capture your comments/notes against your goals as many times as you want, which means you have enough data to choose from when you start writing the annual performance review. Similarly, there are tools that can help in setting SMART goals, or letting others review your comments before submitting them, etc. However, tools in this arena do need lots of improvement before they can start solving some of the big problems mentioned in that post.

What has been your experience in administering and/or receiving performance reviews and how would you recommend we fix the process?