Rethinking Performance Reviews for 2012

The first chapter of my new book, A Factory of One, addresses the need to define value in your work. This is a critical first step because, in my experience, organizations often spend time, effort, and energy improving a process that creates no value -- and therefore shouldn't be done in the first place. (Incidentally, you can download a pdf of this chapter for free here.) The flood of performance reviews that come at the end of the year reminded me of how important this step is. A recent SmartBrief on Leadership survey demonstrates just how valueless performance reviews really are:

Incredible: 58% of the responders say that the reviews are pretty much worthless -- and you can bet that a significant proportion of the other 38% has no value either. As the Wall Street Journal reported,

One academic review of more than 600 employee-feedback studies found that two-thirds of appraisals had zero or even negative effects on employee performance after the feedback was given.

Samuel Culbert, professor of management at UCLA, is probably the leading voice in attacking the pointlessness, ineffectiveness, and immorality of traditional performance reviews; in his view, the performance review should be replaced by the performance preview -- which, from a lean perspective, makes total sense: after all, the PDCA cycle begins with planning, which is what the performance preview is all about.

In light of these results, you have to wonder why companies have reviews in the first place -- and why they'd want to have even more of them. Fifty-one percent of companies conduct formal performance reviews once per year, but now 41% of firms do semi-annual reviews. As Culbert tartly asks, "Why is doing something stupid more often better than doing something stupid once a year?" Or in my language, why improve a process that has no value at all?

I think that a better approach for 2012 is to ditch the performance review and move towards employee performance PDCA:

1. Grasp the Situation: Identify the goal for the week or month 2. Plan: Make a plan for how to accomplish that goal 3. Do: Follow the plan 4. Check: Determine whether or not the plan has been achieved, and why (or why not) 5. Adjust: Make changes as needed to help the employee reach the next goal

This approach may sound mechanistic, but if you think about it, it gives you a fighting chance at achieving that things you really want: better communication. Closer cooperation. More salient feedback and mentoring. Improved performance. Attainment of key goals.

If this sounds like it's too much work, or you don't think it will fly in your organization, fine. Just stop wasting your time -- and more importantly, your employees' time -- on the traditional performance review. Your employees will thank you.