While research continues to emphasize the importance of employee performance reviews, performance management protocols are changing

Performance Reviews, man giving a thumbs up

More than a third of U.S. companies, according to the Harvard Business Review, have eliminated traditional employee performance reviews, as leaders and employees alike found that the outdated performance appraisal systems were causing more harm than good to their teams’ cultures. Impactful leaders, however, aren’t doing away with performance reviews: their approach is just dramatically changing. Growth-driven leaders are both acknowledging the ineffectiveness of the outdated system and choosing to honestly and thoughtfully engage more deeply in their teams’ successes by exploring, experimenting and remaining open to new evaluation methods.

“We are in the midst of a profound shift in how work gets done, one that asks leaders to go beyond being controllers with a mindset of certainty to becoming coaches who operate with a mindset of discovery” (McKinsey Quarterly. 2023.  “New Leadership for a New Era of Thriving Organizations”)

Backed by research, measuring employees’ performance and providing feedback are both crucial elements of a company’s success even in the face of a rapidly changing workforce. Incremental performance reviews (studies would suggest “the more the merrier”) are one of the manager-employee touchpoints integral to creating professional development plans, implementing coaching opportunities, and encouraging collaborative company-wide growth. In healthy organizations, performance reviews serve several purposes, including as platforms for two-way conversations regarding needed adjustments and as opportunities for managers to re-engage employees in their organization’s vision.

Man signing papers with a pen, performance feedback

“For recipients, feedback has intrinsic and extrinsic value,” senior lecturer at Harvard Business School Frank V. Cespedes explained. “Across fields, research shows that people become high performers by identifying specific areas where they need to improve and then practicing those skills with performance feedback” (Harvard Business Review, 2022,“How to Conduct a Great Performance Review”)

Cespedes further elaborated on the value of reviews not just for those receiving them, but also for those giving the feedback. “The process is key,” he explained, “to getting people to practice the right things, prioritize opportunities, and clarify accountabilities owned by the individual versus the manager or the company.”

Employee performance reviews: when are they more harmful than helpful?

However, despite the multi-faceted benefits of performance assessments firmly established from a theoretical perspective, many employees still face the reality that their organization’s top leaders lack adequate executive coaching, interpersonal communication skills, and empathetic worldviews.

A tool is only beneficial when used by someone skilled in its function, limitations, and purpose; managerial tools such as the performance review are no different. Sadly, many leaders are inexperienced giving feedback or inept at communicating vision so performance discussions devolve into unmitigated disasters more often than they should. Some researchers would go as far as to say that past performance management protocols are not just outdated, but also completely broken.

“Traditional performance reviews and approaches to feedback are often so bad,” emphasized co-authors and Gallup researchers Robert Sutton, PhD, and Ben Widgert, PhD, “that they actually make performance worse about one-third of the time” (Gallup, 2019, “More Harm Than Good: The Truth About Performance Reviews”).

Team working on laptops, discussing employee performance

So, how can leaders shift their approaches to foster company cultures grounded in constructive feedback and collaborative employee development? How do companies promote equitable environments where the best and the brightest employees want to invest their time and effort?

First, let’s take a look at some of the numbers.

Alarming performance review feedback

According to Gallup’s 2017 research paper Re-Engineering Performance Management:

  • Only 2 in 10 employees strongly agree that their performance is managed in a way that motivates them to do outstanding work.
  • Only 30% of employees strongly believe that their manager involves them in goal setting.
  • Only 21% of employees strongly agree that they have performance metrics within their control.
  • Only 14% of employees strongly agree that the performance reviews they receive inspire them to improve.

As this data demonstrates, company cultures haven’t benefited for quite some time from traditional performance rating systems used by managers devoid of basic coaching skills. Additionally, as Gallup’s research paper documented, traditional performance reviews are often the opportunity managers use to combine too many different conversations (including those related to pay and promotions), making productive communication – much less any sort of collaborative career development planning – nearly futile. Plus, the failing performance rating system still being used by many organizations was curated for the needs of a workforce that existed in the 1960s and 70s – a workforce with correlating job priorities and expectations that no longer exists today.

Backed by data, it feels justified to conclude that the traditional employee performance review processes that so many are familiar with after years of professional experience simply don’t serve leaders or employees anymore. In our global marketplace where hybrid and virtual workplace environments abound while simultaneously strict job descriptions are fading into distant memory, the majority of today’s workforce is frustrated at best when forced to endure traditional performance reviews. At worst, talented individuals choose to leave companies disgruntled after being undervalued and criticized by managers who are still trying to dictate versus listen and coach.

“If performance reviews were a drug,” Sutton and Widgert (2019) concluded, then the outdated review system “would not meet FDA approval for efficacy.”

White board written productivity Man on the phone call

Performance management’s complete makeover

For the majority of researchers critically rethinking performance ratings, it’s not the “what” – or the review itself – that researchers question. It’s the “why” and the “how” of the overall outdated performance management system that requires a complete makeover.

Among the clear shifts changing the face of management:

  • The performance management model is shifting in style and name toward leadership coaching approaches of performance development and performance engagement.
  • The workforce is transitioning from being dominated by the baby boomer generation to being driven primarily by the workplace expectations and career needs of millennials, who now account for about 40% of the workforce.
  • Millennial employees need to feel engaged in a company’s purpose more than any other prior generation of workers, and “when their needs are not met, they are not psychologically committed to their company” (Gallup, 2017, “Re-engineering Performance Management”).
  • Employees no longer list “opportunities for advancement” in their top four career needs, but now prioritize “ongoing feedback and communication” and “accountability,” shifting how they need to be managed from generations prior.

Sutton and Widgert (2019) succinctly highlighted one of the most important current management shifts by explaining that in this revamped approach where managers function more as coaches – and should be trained as such – leaders must intentionally engage in frequent, real interactions with employees. One or two formal performance reviews a year don’t cut it anymore. “Effective coaching,” they wrote, “requires understanding an employee beyond their performance numbers and the limited observations made by managers — and that means having real conversations.”

Two females discussing about future performance reviews

What does the future of performance reviews look like?

(Are you looking for guidance on how to conduct effective mid-year reviews?, This article by Forbes Advisor breaks it down into 10 straightforward steps including follow-up action plans and accountability Our international team of coaches is available to support you and help your organization develop a performance review system unique to your company’s needs.)

To be fair, no one knows for sure what the future of performance reviews will look like. So far the results of various experiments vary too widely by industry to ascertain if there is one tried and true approach guaranteed to support managers and employees across the board in 2023 and beyond.

However, here are five performance review trends predicted by Talent Management’s writer and acclaimed head of talent management Mohamed Ameen that we find fascinating and worth thoughtfully incorporating into your organization’s executive leadership and management strategy to stay current with employee workplace expectations:

Performance reviews will become project-based.

Essentially, this means that employees will be evaluated after each completed project based on project outcomes and on feedback from colleagues/clients. Project-based performance reviews will replace traditional models that schedule reviews after a set amount of time such as quarterly or annually. Compensation will regularly be adjusted project-to-project, and there will be clearly defined goals and pay raise expectations for all upcoming projects.

Goals will be personal as well as professional.

“In the next evolution of performance management,” Ameen explained, “HR leaders will seek to integrate personal goals, such as well-being and acquiring skills not directly related to their work.” Furthermore, employees will be equipped with self-assessment tools to evaluate themselves on personal and professional fronts.

Feedback and development will become more automated via technology’s data-based, timely feedback capabilities.

While there has been plenty of skepticism from baby boomers regarding technology’s growing role in management practices, millennials don’t have that same reservations. Rather, they value the ability to receive objective, regular feedback on project achievements, as well as the vast capabilities of employee monitoring software to guide performance improvements more closely than a manager would have opportunity to do.

Managers will no longer manage performance.

Future workforce managers will find their roles dramatically shifting: they will monitor performance less and encourage employee career development more. This paradigm places even more responsibility on companies to adequately train their managers and provide ongoing leadership coaching for all levels of leadership from the top down. Numbers will matter less, and people will matter more.

Team performance coaching will emerge as a separate focus.

Thanks in part to the hybrid workplace now common following the global pandemic, companies will need to design performance development approaches for individual employees and separate approaches for measuring team collaboration and team dynamics. While the traditional workplace more easily merged these professional elements, individuals are no longer connected in the same way to their teams with factors such as differing geographical locations, inter-team cultural differences, and new virtual office environments posing fresh challenges for leaders to tackle.

“The rise of hybrid work models,” according to Ameen in his article predicting 2023 trends, “and the increasing desire for employees to be seen as people, not just workers — makes this a critical moment to rethink the purpose and value of performance management programs….It’s time for a shift toward the concept of performance enablement…in which organizational performance goals can be cascaded down into projects and assignments aligned to people’s skills, not their job titles.”

For some of us, these changes may be hard to imagine, but for others these changes ignite excitement – and perhaps also some trepidation – when picturing the shifts on the horizon for performance management strategies. Fresh performance engagement practices provide both what people crave in their workplace environments and what organizations now need for successful talent development.

Man button his coat

Reach out to Churchill Leadership Group today to discover how we can help your organization at all levels of leadership develop executive coaching plans, support your leaders, and work with you to rethink your company’s performance development approach.

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