A Revolution in Performance Management

​More than a third of U.S. companies have abandoned the traditional performance appraisal process. These include tech companies such as Adobe, Dell, Microsoft, and IBM, professional services firms like Deloitte and PwC, and early adopters in other industries, including GE, the longtime role model for traditional appraisals.

Writing in the Harvard Business Review, Peter Cappelli, the George W. Taylor Professor of Management at Wharton and Anna Tavis, Clinical Associate Professor of Human Capital Management at NYU, say they see three clear business imperatives that are leading companies to abandon
performance appraisals:

• The return of people development: Keeping good people is critical, and companies have been trying to eliminate “dissatisfiers” that drive employees away. Annual reviews are often on that list, since the process is “so widely reviled and the focus on numerical ratings interferes with the learning that people want and need to do.”
• The need for agility: Future needs are in flux, and organizations don’t necessarily want employees to keep doing the same things. “It doesn’t make sense to hang on to a system that’s built mainly to assess and hold people accountable for past or current practices.”
• The centrality of teamwork: Moving away from forced ranking and appraisals that focus on individual accountability makes it easier to foster collaboration. 

The authors argue for a system that more closely mirrors the natural cycle of
work. Ideally, conversations between managers and employees occur when
projects finish, milestones are reached, and challenges pop up.

How is your organization evaluating performance, and do you think its method
should be updated? To join the conversation, click on
​“Comments” above.

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