What’s the Real Purpose of Annual Employee Reviews?

A Truth Universally Acknowledged

Everyone hates performance reviews.

The traditional annual performance review has been a standard management practice since World War II. Over this time, it was seen as a necessary evil, viewed by some as the gold standard of accountability, and in some cases, it was the first step of the “rank and yank” — the practice of ranking employees and dismissing the lowest — something GE was known for in its Jack Welch days.

In the past few years, however, many companies, including GE, have reconsidered the annual review, citing administrative burden and potential legal risks — corporate-centric reasons.

What should be the real purpose of an annual review? Should it be motivated by a corporate-centric or employee-centric perspective? Those are the questions that led to a discovery journey for a team of executives at the University of Virginia Darden School Business.

What’s the Point? (No, Really)

In March 2015, a group of cross-functional leaders gathered to evaluate staff performance ratings, which was a required element of the University of Virginia’s performance review process.

The Darden team quickly concluded that the purpose of employee reviews should be “to help staff learn, resulting in improved performance and personal development in furtherance of the Darden mission and its values.” In fact, the team stated adamantly that the current process did not support this objective and asked, “Is there a better way?”

Among the issues for these managers were the following:

• Managers feared providing feedback because of the difficult conversations that could occur and the inauthentic atmosphere of the meeting.
• Employees feared being labeled and the consequences to their pay.
• There was more attention to the Review Form than to the substance of the conversation because of the complexity of the system and the scale.
• Inflated or unconstructive feedback did not help performance or development.
• The managers did not have good feedback skills.

How Do We Do It?

The team next considered the latest science about how people best learn, and they focused on the following insight, from Darden Professor Ed Hess’ book Learn or Die: Using Science to Build a Leading-Edge Learning Organization: “Learning occurs best when we are not fearful and we are not defensive.”[i]

Based on the issues the managers had observed in the current ratings system, they developed a hypothesis that more frequent, future-focused employee-feedback conversations would be less threatening and motivate learning.

The team decided to test this hypothesis by using a design-thinking methodology with the assistance of Darden Professor Jeanne Liedtka. Design thinking, an approach to problem-solving that spurs innovation, demands a candid look at a problem to dig down to what really matters.

In fact, Liedtka used the pilot program as a project for her Second Year MBA design thinking class. Students worked with the team to focus on the customer — the employee, in this case — and performed ethnographic interviews to develop personas and staff development prototypes.

An Iterative Process

As a result, after receiving buy-in from University and Darden leadership, the team launched a pilot program in 2016 with several Darden business units.

The participating managers would:

• Meet monthly to share what was working or what was not.
• Engage employees in the co-creation of the format and the frequency of the feedback in their respective areas, resulting in many different potential prototypes.
• Scrap the current annual review system, perceived as a distraction and an obstacle, instead of an enabling tool.

Another essential piece of the puzzle emerged at one of the monthly meetings: The pilot team decided to provide training for managers to develop feedback skills. All managers were invited to a series of workshops on listening, goal setting, one-on-one meetings, providing feedback and coaching.

One Size Doesn’t Fit All

Co-creation between managers and direct reports led to several different prototypes that fit the unique needs of each team. For example:

Prototype 1: Weekly meetings. Three out of four weeks, they discuss the status and content of the work. The fourth week, they discuss the how of the work: what could be done differently, the employee’s development and feedback for the manager.

Prototype 2: Quarterly meetings to both discuss the status of projects and consider what development opportunities may be appropriate.

Prototype 3: Monthly meetings to reflect, put progress in context and celebrate it. They discuss how the employee has advanced in areas that showed opportunities for improvement.

Feedback on the Feedback System

Maureen Wellen, executive director of Faculty Advancement, summed up the benefits: “We’re an educational organization, and this fostered conversation about Darden staff members’ learning. It really helped me see the growth each member of the team is making.”

Sean Carr, executive director of Darden’s Batten Institute for Entrepreneurship and Innovation, also served on the pilot team. “We were empowered to develop a performance enhancement and professional development approach that was both meaningful and practically useful for each of us, regardless of our roles or areas of responsibility,” he said.

Sarah Elliott, assistant dean of student affairs, added, “We were able to be more thoughtful about how we were approaching our work, which led to new ideas and new initiatives.”

Kathy Kane, academic operations coordinator, said of the other side of the process: “I used to dread the whole evaluation process. It was time consuming and I was not sure what HR was really requesting. Now my supervisor comes to my office and we talk. She makes it comfortable for me to say what I am really feeling and often has helpful suggestions on how to handle a situation. The whole process now feels relevant, therefore I feel much more invested in the system.”

Continual Learning

Based on initial positive results, the team decided to continue the pilot by expanding to additional managers and employees across the enterprise, who continue to iterate on the experiment and create additional prototypes.

The new team is focusing on coaching skills for managers, which require humility, rather than a top-down “do what I say” approach. Themes in Hess’ latest book, Humility is the New Smart: Rethinking Human Excellence in the Smart Machine Age, resonate with this new perspective of enablement and human development, versus the traditional processes and programs of human resources.

Eighteen months into the experiment, the results show that changing the focus and purpose of feedback from a corporate-centric purpose to an employee-learner-centric purpose can have positive cultural, developmental, engagement and performance ramifications.

No employees included in the pilot asked to go back to the traditional once-a-year format.

Lisa Cannell is managing director at Darden, where she collaborates with leaders on talent management research and initiatives. The pilot feedback system launched under her supervision as Darden’s chief human resources officer.

[i] Hess, Learn or Die: Using Science to Build a Leading-Edge Organization, 19.