Is giving up the annual appraisal process the best way forward?

27 August 2015

Mixing regular and longer-term performance management may be more effective.

Accenture and Deloitte are ditching their annual appraisal process because it is time-consuming, cumbersome and because employees want “instant performance management,” according to Accenture chief executive, Pierre Nanterme. Should other employers be following their lead?

Certainly management training on performance issues needs to improve, whether employers have a formal annual appraisal process or are moving towards a more instant system. Managers are often technical experts, or talented rainmakers who drive profitability forward. They do not necessarily have good people management or communication skills. The key to being a good manager is training on managing performance and supporting employees to develop their careers.

Managers should give both praise and constructive criticism whenever they review a piece of work, but in practice such feedback happens infrequently. Even at appraisal time, many managers do not like having awkward conversations with staff, so appraisal documents rarely reflect true performance concerns. This makes it difficult for employers to defend unfair dismissal claims successfully, as documents can conflict with managers’ oral evidence.

Employees need two years’ continuous service to bring an ordinary unfair dismissal claim. Employers can, therefore, fire employees with less than two years’ service without going through a performance management process, unless the employee has potential discrimination or whistleblowing claims. It will always be relatively easier to dismiss newer employees, therefore, than to raise difficult performance issues with them.

But if employees are given feedback regularly throughout the year, then managing under-performance should become easier. Employees should see the writing on the wall when things are not working out and will be more likely to resign with their dignity intact, which is in both parties’ best interests. Unfortunately though, employees who are difficult to manage are often the least self-aware, react adversely to constructive criticism and have an over-inflated sense of their abilities. That is why disputes often arise.

The benefits of instant performance management can be seen clearly when contrasted with employees being shocked when they are told during their formal appraisal, well into the year, that they have no chance of meeting their annual bonus targets, their performance is unsatisfactory and they are being put on to a formal performance management programme. But instead of ditching annual appraisals altogether, maybe businesses should combine informal performance management with a more formal bi-annual appraisal process?

Appraisals should be a natural progression from managers’ regular discussions with employees throughout the year, so there are genuinely no surprises at appraisal time. Instead an appraisal becomes an opportunity to set annual objectives, and discuss in more depth the feedback employees have already received and how this fits with their career progression.

Annual appraisals and instant performance management only work constructively if managers are brave enough to be honest. Difficult feedback, backed up by examples of unsatisfactory work, is not bullying or harassment, and some performance management policies expressly state this. Managers who performance manage poor performers need the full support of their senior management, as there is a risk of a grievance being brought against them by the employee concerned. A supportive environment for managers dealing with difficult performance issues will encourage a high performance culture.

Superficial appraisals or glib instant feedback in which line managers merely reassure employees that everything is great and they just need to keep doing what they are doing, without any substance or evidential feedback or any in-depth discussion about career progression and prospects, can be as disheartening for employees as a poor appraisal rating, and can also lead to them leaving the business.

Employees feeling valued for what they do regularly is often more important than their salary level. Reinforcing this frequently can lead to increased morale and retention rates. Regular conversations which are documented can also help mitigate the risk of disputes. Best practice for employers involves regular performance dialogue between managers and employees, together with an annual review. Accenture may well find its new approach creates as many problems as it solves. 

This article first appeared in People Management on 25 August 2015.

Further information 

For further information, please contact a member of our Employment Team.

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