The End of the Annual Performance Review: tectonic shift in the way we work

Accenture CEO Pierre Nanterme told The Washington Post that the professional services firm, which employs hundreds of thousands of workers around the globe, will disband the once-a-year evaluation process starting in fiscal year 2016. It will implement instead a system in which employees receive feedback, by means of simple ratings, from their managers on an ongoing basis following assignments.

Accenture is joining a small but prominent list of major corporations. Six percent of Fortune 500 companies have gotten rid of rankings, according to management research firm CEB. These companies say their own research, as well as outside studies, convinced them that all the time, money and effort didn’t accomplish the goal of improving employee performance. CEB found that 95 percent of managers are dissatisfied with the way their companies conduct performance reviews, and nearly 90 percent of HR leaders say the process doesn’t even yield accurate information.

“Employees that do best in performance management systems tend to be the employees that are the most narcissistic and self-promoting,” said Brian Kropp, the HR practice leader for CEB. “Those aren’t necessarily the employees you need to be the best organization going forward.” And brain research has shown that even employees who get positive reviews experience negative effects from the process. It often triggers disengagement and reduces openness and creativity.

CEB also found that the average manager spends more than 200 hours a year on activities related to performance reviews such as training sessions, filling out forms and delivering evaluations to employees. When you add up those hours, plus the cost of the performance-management technology itself, CEB estimates that a company of about 10,000 employees spends roughly $35 million a year to conduct reviews.