Category: MPR

Why You Need to Modernize Your Performance Reviews

We see a lot of raised eyebrows when we speak about a modern approach to performance reviews. Historically, performance reviews are dreaded by both managers and employees. The anticipation of sitting down for an annual meeting is stressful and awkward, and when the conversations do finally take place they’re not as beneficial for either party as they could be.

The truth is that there is a better way to do performance reviews. 

At Castle we’ve created a modern approach to performance reviews that are beneficial for employers and helpful for employees as well. This does present something of a shift in thinking for employers; many came up as employees in workplaces that did things the old fashioned way. We recommend that as employers you cast aside that once-a-year port mortem mentality, stop focusing so much on salary, and really make sure that your employees are motivated and growing professionally. 

We get a lot of questions about how to handle performance reviews, and we wanted to share a few tips that highlight the benefit of modernizing your approach.

What is the goal of a performance review?

The ultimate goal of a performance review is to make sure that you have the right people in the right seats at your company. The old approach to performance reviews is a missed opportunity here. Instead of trying to rank employees by whatever metrics, we are better served making sure people have the skills to succeed in their role.

As workplace expert Jim Collins talks about in Good To Great, use performance reviews as an opportunity to make sure that you have “the right people on the bus, the right people in the right seats.” A performance review is your best method for quality assurance when it comes to your employees. You’ll be able to ensure that your employees are performing exactly as you expect, and if there are any issues you can address them quickly before they escalate. 

Remember, when it’s your workplace you’re the one driving the bus. Not only do reviews make sure that everyone is sitting in the right seat, but you’ll be able to quickly recognize who needs to change seats, and who is ready for more responsibility. This level of familiarity with your team makes it easier to promote from within, which in turn can save both time and money instead of recruiting externally.

How often should we do performance reviews?

The old method is to do performance reviews annually, usually at the end of the calendar or fiscal year. Employees spend the weeks leading up to the review on their best behaviour, creating a recency bias that’s very real. Employers and managers running teams are also forced to try and remember what happened with each report for a full year – and that’s hard!

The modern approach is to run quarterly reviews. This frequency takes a lot of the pressure off of the meeting, and allows it to flow more like an ongoing conversation. We have found that this gives employers a greater degree of control in the process, too. Not only are they working with employees when they’re more relaxed, but they’re able to assess performance in real time instead of forgetting about incidents that have long passed – or waiting up to a year to address them. 

Quarterly reviews are beneficial when it comes to setting goals, too, by enabling shorter-term, practical goals alongside larger ones. Tracking and measuring progress is much more motivating this way. The continuous feedback keeps employees more engaged, and excited about their development.

Should performance reviews be tied to pay?

This question comes up all the time, because a direct link from review to compensation is very much the typical flow. Employees have been trained to enter the conversation as though they’re visiting a mall Santa: present a list of their good deeds and accomplishments over the past year, and then ask for the salary increase that they believe they deserve. This may have worked at a time when employees stayed with the same company for decades and salary increases were the greatest badge of honour for a job well done.

That is no longer the case. 

Employees are much more mobile across both companies and roles these days, so keeping the right people loyal to your team is going to require a new tactic. Regular performance reviews can become a dynamic conversation about growth, which is something modern employees value as a token of success. 

Salary increases are important, and of course there is still a place for them. Tying them instead to long-term growth and development changes the game: consistent hard work plus the drive to improve and learn leads to rewards. It’s not enough to just be great in Q4, hoping that’s all your manager remembers.

“Employees will recognize that performance reviews stop being an adversarial process and start being a conversation with a manager that’s invested in their success.” 

Can performance reviews increase employee retention?

Absolutely! One of the biggest problems with the old approach is that they effectively became an exercise in ranking employees. Once reviews were completed you could list your employees from best to worst by a numerical score, which doesn’t contribute to employee development and is not a useful way to look at human beings. If an employee feels like they’re just a line item on some ranking sheet, how likely are they to stay, knowing that everything they do is reduced to one number?

Employee retention is a huge problem in any sized company. We recently assisted with a benchmark study in the MaRS Discovery District, which showed that the average number of leaders who were promoted from within is roughly 20%, or 1 in 5 – and this was true for both larger and small companies. That’s really low! Imagine how a higher internal promotion rate could improve loyalty and morale, not to mention preserve your company culture and internal operating knowledge.

Modern performance reviews – done quarterly – show you who is really on your bus. You will gain a fuller understanding of your employee’s hopes and ambitions, and can spot opportunities for advancement far earlier. Not only is there a cost and time savings to promoting from within, but employees knowing that such opportunities exist motivates them to stick around for the long haul.  

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How do we run quarterly review conversations?

When employees are surveyed and asked about the best qualities in a manager, the universal answer every time is when employees believe that a manager truly cares about them and their success. Financial rewards are nice to a point, but there is no substitute for having a manager that is ultimately rooting for your success and offering whatever support they can along the way.

While old school reviews are top-down, modern performance reviews allow you to turn them into a conversation. Show employees you care by speaking openly about what is working, and what opportunities exist to improve – whether that’s for this role, or the next one. Ask them where they would like to go next, and discuss how you can help them get there. Our approach is to make the conversation centered on the person, not about a score or a number. Employees will recognize that performance reviews stop being an adversarial process and start being a conversation with a manager that’s invested in their success. 

It’s no secret that at Castle HR we see performance reviews differently. Our approach has helped our clients reinvent the way that they engage with their employees, and has ultimately led to greater retention and greater team development.

Our outsourced HR professionals work closely with our clients to help them change their performance review system top-down. Our approach is a unique one, and we will work with you step by step to implement it into your organization. Schedule a time below to set up an HR consultation and learn more about how we can help you do things differently.

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