Annual performance appraisals are outdated

As the year comes to an end, supervisors and managers have no choice but to do the annual performance appraisals of their subordinates. For a good many, the “yearly highlight meeting” with their bosses does not make a difference.

Some employees come into the room, sign the forms and leave with a view that they will leave the company if they get a better offer, irrespective of the outcome of the appraisal.

They leave the company for a variety of reasons – from getting better offers to seeking to venture on their own in the gig economy and sometimes to do nothing but travel. The last group are generally those whose parents have left them handsomely endowed.Essentially, there is no sense of loyalty.

There is a dwindling group of employees who take the yearly appraisals seriously.

In the most extreme of cases, anxiety builds up while waiting for their chance to be appraised. Some go to the extent of writing down their achievements for the year to “jog the memory” of their bosses.

For such group of employees, the annual performance appraisal sessions become a good 20-minute exchange with their bosses to give and receive feedback. Most of the time, the exchange does not lead anywhere.It’s because the feedback from the boss is more his or her own views. It can be biased and rendered with a tinge of favouritism.

The response from the employee is to vent his or her frustrations on the immediate superior, the company, work processes, salaries and everything else that in their view is not right. More often than not, it is without basis.

A recent report cited a survey by the Society of Human Resource Management that revealed that 95% of employees were not satisfied with the performance appraisal system adopted by companies.

Despite the shortcomings, the annual performance review exercise continues to be seen as an avenue for employees to showcase their achievements. It is seen as the session that is tied to the increments, bonuses and promotions of employees.

In the brick and mortar economy where productivity can be quantified in the majority of the jobs, an appraisal system works better. For instance, the productivity of a factory worker is easily quantified by the output. The assessment gets more difficult to measure the productivity of a teacher, a clerk or even a journalist.

They all play a role in the organisation for it to become bigger, better recognised and ultimately more profitable. It is difficult to quantify their output but without them, the organisation cannot function.

The employee appraisal process is more intricate in the clicks and mouse economy. The value of an employee lies more with the knowledge and ideas that they bring to the table. The employee would probably play a minor but critical part in the whole process of the commercialisation of a product.

How do employers appraise employees as more get employed in the gig economy?

How does an employer ensure that they have rewarded employees fairly and equitably? How do companies come up with an appraisal system that is seen to be fair by employees?

It is not a simple solution. But it is something that most companies need because increasingly more of their employees are Millennials and from Gen Z.

The current appraisal system that most companies adopt is archaic. It is based on the bell curve rating system where only the top 10% are rewarded and the rest are thrown a pittance.

The “bell-curve” appraisal system was made famous by the former chief executive of General Electric Jack Welch who believed in brutal honesty in assessing employees. Under his watch, the value of GE rose to become the most expensive company in the world. He adopted a performance appraisal system where the bottom 10% were told to leave the company.

It was in an era of the brick and mortar economy when productivity was more easily quantified. He took over at a time when GE had a bloated workforce and cost cutting was the name of the game. During his tenure, it was reported that the value of GE increased by up to US$300bil.

But even GE is no longer using the bell-curve method to appraise its employees. GE’s business model has transformed and now the company uses a system that is adopted by most technology companies.

The system requires constant feedback and exchange between the employees and their bosses using the various communication channels.

It is a forward-looking appraisal system where the bosses keep in touch with the progress of their employees and there is constant guiding and feedback from both parties to ultimately reach the targeted output. Each of the bosses is made accountable to the final output of his or her section.

And the rewards or brickbats come immediately. It does not have to be one year before each of the section heads or supervisors are told to buck up or leave.

The yearly performance review does not suit the current economic environment where employees want real-time feedback for self improvement.

There is a good section of Millennial and Gen Z employees who want to be challenged at work, want to see a career path and continuously learn.

It fits with their habits of accessing everything through technology – from paying bills to consuming news. They appreciate instant comments and feedback.

Annual reviews are outdated. The new performance appraisal system is one where the “yearly meeting” with the superiors is just to set the target for the next level. It is a forward-looking appraisal system.

The rewards are dynamic and keep changing and come together with the opportunity for the employees to keep learning new things.

One reason why employees leave or get demotivated is because they stop learning and the rewards are cast in stone, whether they perform or not.

The views expressed are the writer’s own.

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