CEOs Should Skip Performance Reviews in 2009

The annual performance-review process won't necessarily accelerate company goals or aid talent management. Sometimes you just have to say no to it

Talent management has corporate leaders in a tizzy right now. With budgets slashed and competitors breathing down our necks, we can't afford to keep the wrong people on board or fail to acknowledge and reward our top players. These days, we don't have a sufficient cushion to keep weak players around, so we've got to spot them, talk with them, and move them quickly into the success zone or out of the organization.

Unfortunately, the typical corporate performance-review process doesn't promote any of these goals. As a Fortune 500 human resources exec for years, I'd routinely go into a meeting with a manager who was dead set on releasing a poor performer. "Now, here, on Sheila's last performance review, you wrote that she was doing a decent job," I'd say.

"I was trying to motivate her," the frustrated manager would reply. This scene played out over and over. Performance reviews, conducted in wholesale fashion by harried managers trying to review too many people in too short a time frame, seldom if ever identify the weak links on a team in a way that supports making tough, stay-or-go decisions.

I'm not a fan of forced-ranking systems, either. Competent managers know without a mechanical ranking process who's performing at a high level and who's barely getting by. In this tough business climate, we need our managers' energy focused on those high- and low-performing employees—to keep our best people glued to their seats, and to move out the weak players. A wholesale, bureaucratic performance-review process not only won't accelerate those goals but also will very likely slow them down. So this year, let's do away with the all-hands review process altogether.

Waste of Time

A one-time bonus can replace annual performance increases this year. We don't need a lot of documentation, a self-assessment, a 360-degree review, or any other tedious HR process to award bonuses to our top people. To do that, we only need to review our employees' goals and their performance against the goals. No goals? Shame on us. If we haven't set clear goals and managed performance in the direction of meeting them, we need to focus less on so-so employees and more on our own leadership vacuum.

Annual performance reviews are supposed to let us know which top performers to reward with perks and promotions. Here's the 411 on that, news that will shock no one who's spent 10 minutes in Corporate America: We already know who those people are. If we can support our decisions with evidence related (here we go again) to those employees' performance against their goals, we're in great shape. We can say to the majority of our employees, "You don't have time, and we don't have time, to invest thousands of person-hours in a review process that may or may not provide any tangible benefits to the firm or to you. If you'd like some feedback from your manager, please let him or her know." Watch how many employees ask for that guidance—I predict 10% of them will, at the high end.

We have fallen into the habit of cranking up the Performance Review Engine once a year under the People Need Feedback theory. Here's what we forget: Whether people need feedback or not, if they don't want it, they won't follow it. Some people love to know what's working and not working in their areas of responsibility. Others couldn't care less. What we can say for sure about un-asked-for, unwelcome feedback is that it'll go in one ear and out the other. Employees who don't especially care what their managers have to say about them run the risk of being included in an upcoming RIF (reduction in force), but who doesn't run that risk?

Feedback Optional

We should make feedback an option for our employees, something to take or leave. As satisfying as it may be for a manager to say "I'm sorry, Jane, your PowerPoint (MSFT) skills just aren't up to snuff," if we don't know for sure that Jane is listening, has the manager said anything of value at all?

I'm thinking no. This year, let's bow to reality and shelve the performance-review process.

We ladle six or eight different functions on one horrendously overburdened hour, multiplied by every employee in our company, every year. That overladen hour only reflects the time that the manager and employee spend together (if they even do that—as more and more employers shift to a "Here's your review form, let me know your comments" model). Many more hours are spent on solo self-appraisal and managerial-appraisal processes, not to mention pointless 360-degree reviews (a great vehicle for managers who can't manage to blurt out the truth without a phalanx of "votes" behind them) and subjective forced-ranking schemes. After all that calculation, we give the employee and his or her manager one hour (out of 2,080 in the year, and that's only the 9-to-5 hours!) to sum up a year's worth of trial and triumph. It's a ridiculous concept. If ever there were a time to stuff it and save our precious mental bandwidth for more-pressing issues, it's now.

If anybody agitates for a return to the dreaded, cumbersome, obligatory performance-review process next year, you can bring it back then.

Somehow I doubt that will happen.

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