Millennials have killed the annual review (and that’s a good thing). Millennials have been credited with killing a wide range of things – among them: napkins, golf, running, department stores, and even Buffalo Wild Wings. But the future of performance management reviews is one thing that Millennials can proudly hang their hats on ending.
A few words about Millennials…
Retail is a dog-eat-dog world and much of the conversation there has been about disruption. There are only disruptors and those being disrupted. Millennials are like the generational disruptor, which is why chains like Buffalo Wild Wings are struggling to attract Millennial customers.
Millennials were molded in the unique gauntlet of fighting their way into the workforce during a massive economic recession while the workforce shrank by 8.7 million jobs. Millennials are shackled with more student debt and offered fewer employment opportunities than past generations. With rents rising across the country and a stagnate minimum wage, Millennials have faced adversity on a greater scale than any generation has since the Great Depression.
That being said, Millennials are more diverse than the other generation that have preceded them with nearly half of the group a racial minority. Millennials are also the first generation to grow up with computers as a ubiquitous household staple. This unique situation for Millennials has led to a group of adults who are socially conscious, interested in humanitarianism, eschew the 9-to-5 job, and feel the need to be emotionally invested in the work they do.
Is the future of performance management dead?
Annual reviews are the long-hated, but long-standing tradition of a manager instructing an employee on his or her strengths and weaknesses to determine what kind of pay increase the employee will receive in return.
Annuals have been ineffective since their inception, which stems way back to the third century, when Chinese workers complained about work ratings. As a Washington Post article succinctly titled an article on the subject, “Study finds that basically every single person hates performance reviews.” This study found that “negative feedback has the potential to discourage even the best performers and the most industrious employees,” and warned managers to be careful to ensure that praise isn’t misconstrued as criticism.
Past performance isn’t a metric by which to measure future success, but yet each year millions of employees are pulled into rooms where this happens. Annual reviews put a heavy emphasis on financial incentives – like raises and promotions – at the expense of grooming employees for future success.
Feedback, even from well-intentioned managers, can feel biased and unfair to employees leading to demotivation, frustration, and an injured relationship between the employee and manager. As anyone who has been evaluated by a spiteful or incompetent boss knows, annual reviews can become a great source of anxiety or apprehension rather than a tool an employee can use to improve performance and move forward with her career goals.#AnnualReviews can become a source of anxiety or rather than a tool an employee can use to improve… Click To Tweet
But that’s not the only problem with performance reviews. The other glaring problem is bias – whether that’s conscious or unconscious. Biases can greatly influence an individual’s success within an organization. It’s been shown that managers tend to like (and promote) employees that remind them of themselves, which is likely white, straight, and male, given the current demographical makeup of C-suite executives in the United States.
As you can imagine with the most diverse working age group in history, Millennials aren’t interested in maintaining the status quo and continuing a tradition of biased, demotivating annual reviews. Carrot-and-the-stick type of management favored in the past isn’t a motivator when salary isn’t the most prized award for Millennials. Millennials want a better work/life balance, flexible schedules, the ability to digitally commute to work, learning and advancement opportunities, and they want to be deeply committed to their roles within an organization.
And if they’re not – they’ll leave. Millennials are the least engaged generation at work (with 71% of Millennials stating they are either not engaged or actively disengaged) and they are also the most likely to switch gears and change jobs for a small pay increase (even for less than 20% increase) or if they believe another company will offer them better advancement opportunities.
While the future of performance management might not include the annual review, performance still does need to be measured and managed. The new approach is performance motivation and not management. Millennials favor a more informal, consistent approach to feedback, which consists of short, immediate feedback given on the spot so that employees can course correct in the moment.
When it comes to a performance management revolution, there are a few companies leading the way: Adobe, Juniper Systems, Dell, Microsoft, and IBM. Even General Electric, which has long been a guidepost for management practices, is joining these ranks by overhauling its review process. GE is experimenting with replacing a formal annual review for its 300,000 employees with more frequent conversations and has introduced an app to facilitate feedback sharing between employees and managers. In fact, many of these companies are developing proprietary apps to facilitate feedback exchange and track performance metrics.
All in all, nearly 10% of Fortune 500 companies have rejected annual ratings, Cliff Stevenson, a senior research analyst for the Institute for Corporate Productivity, told the Washington Post. Stevenson estimates that that number will quickly grow as more companies jump on the bandwagon. “The snowball has started rolling. I would not be surprised to see next year…that it may jump into the twenties.”Nearly 10% of Fortune 500 companies have rejected annual ratings #PerformanceManagement #HR Click To Tweet
While the replacement for the annual review is still taking shape, which each company sculpting a new way forward in the realm of performance management, there are a few takeaways we can draw: the performance motivation movement will be tech heavy, a system that does not try to eliminate bias is inherently flawed, and finally, feedback needs to be given in smaller, bite-sized pieces designed to motivate and encourage employees. The performance motivation revolution will focus on the success of the employees or it will fail. Millennials and the upcoming generations will demand it of their employers or they will leave.