The annual performance review is dead

The perfect storm is upon us in the world of human capital – the transition away from the annual performance appraisal, the wave of the millennials’ prominent place in the workforce and the need for relevant and meaningful big data or human capital analytics. What emerges from the confluence of shifting forces is what we’re calling the Human Capital Triangle, a model that captures the dynamic convergence of these powerful trends. While these are not the only important trends in the human capital analytic field, they do represent what is quickly becoming a significant differentiator for leading organizations when understood and leveraged strategically.

So, what insight and impact does a strategy involving the Human Capital Triangle possess? Insight and impact into how human capital can drive performance in a quantifiable and meaningful manner like never seen before. In the coming days, we’ll explain how you can put our findings into practice.

First up, how performance reviews are changing.

The annual performance appraisal is on its way to becoming a dreaded and ineffective activity of the past. A U.S. poll from San Francisco consulting firm, Achievers, revealed “98% of staff find annual performance reviews unnecessary.” Many companies are moving away from the annual performance appraisal like General Electric, Goldman Sachs, Accenture and Morgan Stanley. Companies are trying to replace the annual performance review with various processes to make the activity more valuable and, in many cases, to drive performance more effectively.

In an attempt to facilitate more effective, collaborative and faster decision making across the organization, GE piloted a shift from their legendary performance management system. Driven by a mobile app to help facilitate the process, employees could receive ongoing and real-time feedback from anyone in their work circles about competencies, skills and behaviors. The pilot achieved a 5x improvement in performance and was rolled out company-wide, according to a 2015 article by Leonardo Baldassarre and Brian Finken in the Harvard Business Review. Central to this outcome was the creation of a culture of shared accountability and a system of continuous dialogue and real-time feedback. GE acknowledges, and most of us in the human capital fields know, this type of feedback is difficult to deliver and receive.

What we have found through our research with our DevelapMe app, where we collected over 1 million data points, is that organizations come into enhanced feedback processes from different foundations. We built the DevelapMe app to diagnose an organization’s culture and feedback orientation using real-time, competency-based feedback. Based on this assessment, we developed specific interventions to help organizations understand the importance of feedback culture, move to the appropriate level of readiness for change and lead and implement institutionalizing a culture of shared accountability through the use of a system of continuous dialogue and real-time feedback. The bottom line is that the level of quality feedback ultimately drives organizational performance, as at least one HR blog has noted.

Check back for our next article, where we’ll focus on millennials and consider their impact on the workforce and needs related to performance and development.