January 3, 2023

How to reinvent performance reviews for the new work order

As the time for annual appraisals rolls around again, consider how you’re conducting performance reviews. You’ve worked so hard to build your team and want to take this opportunity to reward and motivate them but does the way you conduct appraisals reflect that?

All businesses risk losing their most valuable employees (think, The Great Resignation); 32% of people will be looking for new jobs this quarter. Performance reviews are an essential touchpoint in the employee experience that can be used to increase employee satisfaction and loyalty.

What if you could outperform the competition and hold on to top talent with a new way of measuring employee contribution?

Top-performing companies are investing in their employees and rewarding them to actively position themselves as the best option among the competition. Appraisals are the perfect opportunity to create a rounded picture of each employee’s experience, what makes them happy and, therefore, what keeps them loyal to the company and at peak performance levels.

This requires an overhaul of the traditional form of appraisals that are limited to a direct line manager’s assessment at a single point in time (or four points in the year).

The old way of working versus the new

Why do businesses need to change their relationship with their employees? The world of work has changed, and employees have many more opportunities to choose from than in the past.

Traditionally, people chose a career and spent most of their working lives with only a few job changes. With working lives extending alongside life expectancy and the constant changes happening around us, new generations believe they have to pivot and explore multiple careers to find their perfect fit. They aren’t limited to one industry, one career and definitely not one company.

Another mindset shift across the workforce is how people prioritise their jobs. More and more people, particularly younger generations, don’t want to feel defined or limited by their careers. Instead, they value the freedom and flexibility to organise work around their personal lives. So, employees are less likely to stay loyal to a particular company if they aren’t happy. Consequently, they leave the company or quietly quit, disrupting the team and impacting performance.

These needs are stimulated and empowered by the substantially increased number of job opportunities and options thanks to global and digital trends. The competition for the best talent is now more challenging than ever. Employees no longer choose between local jobs but can access global roles through remote work. The challenge of higher expectations and competing opportunities will only be solidified as generation Z permeates the workforce.

How to adapt employee performance appraisals to retain talent

Out with the old

Appraisals have always caused tension in companies for two main reasons. Firstly, most people feel intimidated when confronting, or being confronted by, their manager. And secondly, it’s deemed an unfair process because the manager’s feedback takes overriding priority and is the sole determining factor when it comes to bonuses and other rewards.

360 reviews and peer assessments have made strides in creating a fairer system, but how they are implemented often limits their effectiveness. Employees often feel vulnerable to criticism and uncomfortable with honestly assessing their peers, even more so when promotions are at stake. And they don’t necessarily have access to the tools to support the implementation of this process.  

The solution isn’t to go back to top-down appraisals but rather to improve the more comprehensive model and create a culture of constant feedback loops.

The new 360-degree performance appraisal system

In light of the new employee-employer relationship dynamic, the purpose and approach for conducting appraisals are changing. Instead of just assessing what employees did or did not do, there is a rounded and democratic assessment of the employee’s performance and how this could be improved.

The assessment should be conducted in line with the company culture being built. Clear expectations, values and purpose from the company culture meet the needs of leaders and employees by improving employee retention and satisfaction. As a result, this leads to productivity, performance and profitability.

The 360-degree approach suits this new way of working; however, it’s not new. While this approach is already used in larger enterprises, its implementation can fall short. A successful and retention-boosting 360-degree appraisal will follow 6 key steps.

  1. Implement a truly 360-degree approach all year round

The assessment of each employee should be comprehensive. It should capture information from peers, juniors, the leadership team and clients or vendors. Collecting feedback during a specific project or milestone captures the immediate impact and behaviours relative to business outcomes. This will give the most accurate and dynamic view of the employee over the course of a year.

  1. Increase honesty through anonymity

One of the key challenges for respondents is the extent of honesty, particularly when it comes to negative feedback. Firstly, this calls for the mechanism of surveys to allow anonymised responses, giving respondents the safe space to be open about the challenges or criticisms. And secondly, and most importantly, the emphasis should be on providing fair and constructive feedback. Conducting information gathering through digital tools like Feefo or using a third-party agency are just two ways to guarantee anonymity.

  1. Balance hard and soft metrics

Hard metrics provide measurable results that are typically the culmination of a team effort. When they’re the only consideration, they run the risk of undervaluing individual employee contributions. Performance should involve both qualitative (such as peer feedback on behaviours and actions) and quantitative data (such as a customer satisfaction score) and be weighted according to the needs of the business. Employing both measures allow a full and fair evaluation of employee performance.

  1. Make the feedback collection process seamless

Embedding feedback into the day-to-day of operations means you’ll get a real-time perspective of the value they add to the business, and it doesn’t overburden employees with additional time-consuming tasks. Send surveys automatically based on triggers and build them into collaboration tools such as Teams or Slack when, for example, an employee has reached a milestone or at the end of a project.

  1. Conduct objective panel assessments and calibration

To ensure a fair evaluation, consider appointing an objective panel to calibrate appraisals. To support this, assessments can be anonymised, and the panel should be empowered to question biases (either real or implied) within the appraisal system. These assessments can be further extended to panel interviews to assess those put forward for promotions.

  1. Use the data to improve your performance next year

Review data collected from last year’s appraisals to hone this year’s assessment. Set clear objectives and key results so every employee knows what the business aims to achieve and their role in helping the company to achieve those goals. Highlight, cultivate and promote the behaviours and actions that will help you surpass those goals. And finally, make sure the way your business is structured and run enables those behaviours and actions.

For example, suppose a goal is to target new markets through service innovations. In that case, employees must be empowered to develop and test new ideas. To help them do this, consider decentralising decision-making and creating innovation labs with a clear framework to validate those ideas.


Getting started with comprehensive appraisals

Companies that use appraisals and performance management as an opportunity to uplift and hire employees create a competitive advantage, not least through retaining the top talent in an era of labour volatility.

The appraisal system should be:

- centred on a comprehensive process that is democratic, as peers, clients, and line managers provide anonymous feedback,

- seamless due to leveraging digital tools and data analysis, and

- made fair through panel calibration and a balance of hard and soft metrics.

The assessment is delivered to empower growth and to achieve the organisation’s goals.

How will you use 360-degree appraisals to retain and cultivate talent?

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