Good Riddance to the Annual Review. Hello to the Future of Performance Management.

Accenture – one of the largest companies in the world –announced that it is abandoning annual performance reviews for its 330,000 employees because the process is “too heavy and too costly” and produces “not great” outcomes. Accenture joins a growing number of major corporations, estimated at 6 percent of the Fortune 500, in rejecting the traditional approach to performance management.

Accenture’s decision was applauded, I am sure, by many organizations around the world. As a performance management consultant, I routinely talk with company leaders frustrated by their current performance management processes and HR managers forced to defend flawed systems they don’t believe in. The source of their discontent? They find annual reviews and forced rankings to be:

 

Beyond these obvious flaws, it is the psychological assumption underlying the ranking/review system that may be the most detrimental – namely, that employees need to be controlled, measured, and rewarded in order to perform well. It assumes that individuals lack self-motivation and can only be threatened or cajoled into doing the right thing. Unfortunately, that belief often becomes self-fulfilling. People who work in a culture governed by control and measurement will begin to shape their behaviors to succeed within those parameters. The structure fails precisely because it undermines personal ownership of performance.

Research shows the opposite to be true. Most people are intrinsically motivated, and respond best to a workplace culture that provides:

 

Autonomy, mastery, and meaning are not possible within a bureaucratic, fixed performance management system that ranks people against their colleagues and pushes them into boxes. Instead, organizations would do well to follow the lead of Accenture’s CEO and say “we’re done with that.” The system you put in its place will depend on your organization’s goals and talent strategies – there is no one-size-fits-all approach. We encourage clients to craft a framework that recognizes employee individuality, trains and encourages managers to have meaningful career conversations with their reports, and creates development paths that enable both the individual and the organization to succeed.

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