The World’s Major Companies are Abandoning Yearly Performance Reviews

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Any corporate employee who’s ever had to sit through the ordeal of yearly performance reviews has several strong arguments against the practice. And now it seems like those in charge of said corporate business milieu are also taking note of the fact that ranking their employees like that isn’t exactly working out for the best. For one thing, Microsoft management has come to the conclusion that yearly stack rankings were encouraging backstabbing, feelings of inadequacy, and an unhealthy sense of competition among their staff.

The system works along several coordinates which often seem set in stone, no matter how unjust they might appear from the outside looking in. According to estimates, 30 per cent of the top 500 companies in the world use such ranking systems to evaluate their staff. Within these systems, employees are evaluated in accordance with a curve, which might say that 3 per cent of all employees must be placed in the bottom segment of on-the-job performance, while only 7 per cent can be at the top. Microsoft in particular has been the target of heavy-handed criticism for enforcing such a system. The procedure had been adopted in the 1980s from General Electric. Many major companies, such as Motorola, have abandoned it already, citing its “demoralizing” nature as one of the main reasons.

What do academics think of yearly performance reviews?

At the same time, the academics concur. Samuel A. Culbert, a professor at UCLA’s Anderson School of Management says yearly performance reviews are pretentious, but also bogus. According to him, no executive with a head on his shoulders should credit such procedures with any merits. Culbert has even proposed an alternative to these evaluations: performance previews. In his view, employees would be asked to express what has been hindering their performance from peeking in terms of management decisions. Managers in their turn would express their needs toward employees, thus creating a collaborative, open environment based on trust, in which the two sides of the debate work together, rather than against each other. Many a times, yearly performance review had been criticized for allowing managers to intimidate their immediate hierarchical subordinates.

Of course, not all of the Fortune 500 companies in the world are letting go of yearly performance reviews just yet. But a significant proportion of them is rethinking the model and shaping it in hopes of yielding more positive results. Here are some of the most notable examples of companies that have tried an alternative to performance reviews:

  • Motorola

After scrapping the yearly performance review, as it was regarded as encouraging self-esteem issues on the job, the company adopted a model that is far more focused on communication and cooperation. Reviews strictly target goal completion, while the talks between managers and staff address all the issues related to those goals.

  • Adobe

Adobe stopped reviewing their personnel in 2012, after the company’s representatives noticed the period set for reviews also marked an exodus from the company. Instead, they no allow managers to check in with their staff, offer feedback, and establish new goals whenever they please. Meanwhile, the employees are only evaluated according to the goals they meet. There is no paperwork involved in this procedure.

  • Expedia

The executive VP of the company’s global HR department says Expedia also relies on giving employees feedback as they progress toward their goal. Instead of sitting back and letting them fail, managers try to address the issues that occur within the process as they take place. This preventative measure is aimed at getting the staff to feel less labeled, while also ensuring that the company’s goals are being met, day in and day out. Unlike yearly performance reviews, this type of feedback focuses on the future and the present, not on the past.

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