Traditional performance management is falling out of favor. This is because the modern workplace is made up of cross-functional teams and is no longer conducive to once-yearly, top-down, daunting employee reviews.
Annual reviews suck time and energy from employees and people leaders for negligible payoff. The proof is in the data: For the fourth year in a row, this Workhuman® survey found that the number of companies conducting annual or semiannual reviews has fallen. In 2016, 82% of workers surveyed said their company used an annual review. That number dropped to 54% in 2019. Further, more than half of respondents said the traditional performance management process is not indicative of all the work they do (53%) and that it does not improve their performance (55%).
Of course, this isn’t to say that there shouldn’t be a review process. Cycles still happen to determine raises or succession, or to offer insight. Organizations that use annual reviews are weaving in continuous performance development, which consists of regular feedback, check-ins, and priority setting. According to research from Brandon Hall, 54% of organizations want to supplement the annual review with more frequent conversations and coaching.
Positivity-driven culture makes crowdsourcing performance reviews possible.
Organizations that crowdsource their performance reviews open up opportunities to the entire working team, not just a select few, to provide feedback. This gives everyone an employee collaborates with – whether they’re a direct report, peer on the same or a different team, or manager, director, or executive – the opportunity to help that individual do more of their best work.
Teams these days, both formal and informal, are increasingly agile. Managers are not necessarily working shoulder to shoulder with employees as often as they used to, even within the typical reporting relationship. Crowdsourcing performance gives each manager insight into everything their direct reports are working on even if it’s not in their line of sight, which increases the trust that all work done by the employee is not missed or overlooked.
And trust is a key theme here, which thrives in a positivity-driven culture. When everyone is encouraged to celebrate the good through social recognition, relationships begin to flourish through trust. Gratitude is proven to build trust and connection, both of which are powerful levers for an honest and healthy flow of continuous feedback of every sort, especially developmental feedback.
Developing that trust among the workforce is so important. Giving and receiving effective feedback means building a culture rooted in positivity, recognition, and vulnerability. One big challenge for many organizations is they don’t think to give people explicit permission to help one another. A cornerstone of the crowdsourced performance review is generating data that gives HR and leadership insight into how work is really happening within their organization.
Now, how do we get there? Not everyone is born with an innate ability to give good feedback, so it’s vital that we teach our workforces about its role and purpose within the crowdsourced performance review. Organizations should develop training to guide the giver and put in-the-moment tips directly within the feedback toolset, which keeps people there instead of sending them off to find resources elsewhere. The training itself should help employees frame feedback so it’s constructive – it should give specific examples, use a helpful tone, and help someone see what they can do next to advance. Feedback givers should aim to be truthful but lean on feelings and observations rather than blame or finger-pointing.
When we evaluate the data within Conversations®, our continuous performance development platform, it shows that the vast majority of feedback moments across Workhuman customers are constructive – not complaining or blaming. Enabling people to easily give, receive, and request feedback adds more voices to the mix, which removes implicit bias by eliminating singular opinions.
Connecting feedback to crowdsourced pay
As an extension of the shifting review process, many businesses are starting to consider crowdsourced pay based on peer-to-peer recognition. This means a portion of the overall payroll budget – best practice is at least 1% – is devoted to micro-bonuses that people give to each other. This is an important lever because it puts power in people’s hands when almost every other benefit or bit of compensation flows from the organization to individuals.
Research from NeuroImage shows that frequent, small, positive experiences have a greater impact on our life satisfaction than a few epic events. We see this play out in the data: The return on investment from a small recognition budget tends to be considerably higher than the return from annual merit increases. Cash-based rewards and bonuses mingle with an employee’s paycheck and are often used to pay bills or for routine needs such as gas and groceries. While this may fill a need, it doesn’t contribute to a memorable experience that makes an employee feel good again and again. To that end, 60% of best-in-class organizations have found employee recognition to be extremely valuable in driving individual performance.
Separating large, annual merit increases from the traditional performance review process removes a monumental weight from managers. It also enables people to receive recognition – and compensation – for exceptional work every day and from anybody. People leaders come and go and formal teams grow and shrink. Because of that, it’s even more important that everyone is empowered to document and memorialize their own accomplishments and those of their colleagues. Whether a formal review is monthly, quarterly, or annual, it’s easy for employees to get lost in the flow of work and forget key initiatives they’ve worked on.
For example, Workhuman team members outside of my immediate team worked collectively to gather information for this article. It will be published and we will move on to other initiatives, but the work they delivered together shouldn’t fade into the rearview as they’re being reviewed on strengths or considered for promotion. Crowdsourced feedback helps the team capture snippets of how this agile team came together and what it accomplished before disbanding. It creates a rich record that enhances how we approach teamwork. And the addition of crowdsourced pay enables members of this one-time team to give each other small monetary awards to say thank you, which, again, reinforces that strong, collaborative culture. It’s a holistic, human-focused cycle more powerful than any annual review delivered out of obligation.
About the AuthorMore Content by Derek Irvine