Three Ways to Improve Annual Performance Reviews

Few human resources practices are more hated than the annual performance review process.  If you lament this annual or semi-annual routine as a financial and emotional drain on your company and its workforce, you are not alone. An estimated 10 percent of Fortune 500 have moved away from performance rankings, according to the Institute of Corporate Productivity, with companies such as GAP and Microsoft replacing performance evaluations with other approaches.

The financial and emotional costs of performance reviews are compounded in the high-turnover, labor-intensive workforce of the restaurant industry. 

Recent research indicates that traditional performance review processes are underperforming for businesses that use them.  Studies suggest that more than 50 percent of performance ratings has to do with the traits of the manager conducting the review, not the employee being reviewed. Other research indicates that while performance assessments generally improved employee performance, the process had a negative impact on performance more than 30 percent of time, especially in cases where the feedback focused on the individual rather than their performance at specific work.

And that’s not all.

CEB, formerly Corporate Executive Board, research indicates 90 percent of managers are dissatisfied their company’s annual review process, and indicates nearly 90 percent of human resources leaders say the process doesn’t yield accurate information. No one is happy, yet companies continue to invest substantial time to conduct and document performance appraisals. Additionally, the financial and emotional costs of performance reviews are compounded in the high-turnover, labor-intensive workforce of the restaurant industry. 

Before you forward this article to human resources with the subject line ‘I told you so!’ consider the following. Employees still need positive and negative feedback about their performance to improve. Human Resources will likely still request documentation to substantiate employee changes, especially separations. And, your company still has to objectively make pay and promotion decisions without increasing bias.

Therefore, consider some of the following three steps to move your performance review process from needs improvement to exceeds expectations:

Collaboratively Assess your Performance Review Process with HR and Operations
  • Can you illustrate a return on investment on the commitment of time and resources?
  • Are there negative or positive SRS impacts following the annual or semi-annual review process as operators shift focus from unit-level tasks and onto writing and delivering reviews?
  • How does the feedback mirror the coaching language within your restaurants?]
Retool your Current Process and Forms for Maximum Impact
  • Shorten performance review templates and reframe questions& topics to create a two-way conversation between the manager and employee.
  • Consider eliminating checkboxes and keeping numeric scales focused to highlight clear examples of positive and negative performance.
  • Schedule performance reviews at a time least likely impacts operations.
  • Consider the pros and cons of tenure-based (30 days after hire, 3 months after hire, etc.) versus a common-date (everyone at once) review schedule.
Use Past Performance to Improve Future Performance
  • Focus the performance review discussion on the future – performance appraisal thought-leader Samuel Colbert calls for “Performance Previews.”
  • Rather than rehash events that cannot be changed, set goals for the future with the employee and use past events to illustrate how changed behavior will lead to greater success.
  • Set an expectation for ongoing, informal conversations about performance between managers and employees. Some companies have formalized this process with 30-60-90 day, five-minute check-ins with employees. 

Retooling your performance review process can be the beginning of a longer-term strategy to make your business a best-in-class people leader. Thought-leaders are looking into the future for ways to leverage cloud-computing and technology to replace traditional performance review processes with “continuous feedback” where employees receive less intense but more frequent feedback from an array of sources on their performance, goals, and areas of opportunity.  Eventually, these shifts in technology will change the way we think about and manage people entirely.