Ditch annual performance reviews for transparent, flexible systems

May 25, 2023

The world of work is changing—organizations are forced to rethink their approaches to talent management, and I’m no stranger to these shifts. The evolving talent space has been a key driver for me to revolutionize how organizations think about career progression and employee development. Unsurprisingly, the pandemic dramatically shifted how people think about work and what they want from it.

I chatted about this shift with my friend Jason Medley, Chief People Officer at Codility. One clear trend that we both have seen is that employees want more authenticity at work, and they want organizations to reflect this transparency through equitable systems and programs. Jason and I both agree: authentic leadership training, vulnerability, and risk-taking are critical elements for organizations.

Jason attended a Stanford University executive program, and everyone in his cohort shared that they are trying to navigate toward greater openness and vulnerability in their employee interactions. Many need help finding the balance, but the need is so great that authentic leadership training is being implemented in the Stanford curriculum. Greater authenticity and transparency in all programs and processes is a critical step to better meeting the needs of employees.

But what about performance management? How can organizations be transparent and authentic? 

Performance management has been a topic of discussion for years now. But despite the numerous iterations that companies have made, most processes still need to be more transparent and equitable. Employees often only know how they're performing once they are called into their review once or twice a year. And when the review happens, it can feel somewhat arbitrary whether they'll get good or bad feedback. This lack of transparency and equity is compounded by biases, such as recency bias, which can unfairly influence performance evaluations.

Performance management processes need to be more connected to the actual work that employees do. Companies can focus on compensation bands or leveling frameworks, and they need to properly communicate expectations about these levels to employees, giving them context for how their work fits into those frameworks.

Jason noted that performance management is often conflated with compensation, which can create a lot of pressure on employees and lead to inauthentic interactions. And an onerous annual process can drain resources, taking time away from actual work and causing frustration among employees.

So, what can be done to improve performance management?

According to Jason, it starts with understanding what performance management really is. It's not just about evaluation and compensation, but also about learning and development. Employees want to have skill progression and growth, and an annual review is not enough to accomplish that. Companies need to have ongoing conversations with employees about their goals and provide opportunities for them to learn and develop new skills. Doing so can create a more authentic and fulfilling work environment.

I have experienced this as a significant challenge, especially in startups. They often overlook the need for systems, processes, and structures that validate employee growth. To be more equitable and fair, some are implementing continuous feedback models. But this is also problematic when managers provide inconsistent or unactionable feedback. Instead, when companies are launching and especially as they begin to grow, leaders should focus on building paths for employee development to unlock their potential impact on the business.

A more structured approach to performance reviews and career development is needed. Jason highlighted the importance of measuring employees against competencies and visually representing their progress. This is what we do best at Pando. We have created a platform that enables organizations to level employees along frameworks that create consistency, equity, and transparency across the organization. Our competency rubrics provide leaders with the tools they need to empower employees as active collaborators in their own growth and development. 

Structured career paths are essential, with separate tracks for individual contributors and managers. Managers should be preparing employees to advance in their careers in the ways they want to advance, and organizations need to take employee development seriously.

What does it take to build scalable systems? 

According to Jason, companies need agile, flexible, and transparent systems and frameworks that grow with them. Agile methodologies are important because they prioritize responding to change over following a plan. Companies should be iterative, creating a culture of continuous learning and development that can be achieved by requesting and receiving feedback on a consistent basis. Feedback is crucial to growth, but it must be delivered effectively and in real time.

Jason says that we need to measure how people feel about their growth, as well as the growth of the organization as a whole. Platforms like Pando can help to identify areas where the organization is strongest and weakest, providing data to help prioritize spending on learning and development. Employee growth and career opportunities are key indicators of engagement and can be measured using the appropriate metrics (e.g., survey tools like Culture Amp).

It’s incredibly important that executives lead by example. Jason says that the past few years have required a level of vulnerability and authenticity from leaders that was previously not measured or considered a competency. He stressed the importance of systems that are flexible enough to keep up with the changing macro environment. A fair and transparent system can help to attract a more diverse pool of employees across all organizational levels, from senior-level executives and managers to front-line workers that drive organizational outcomes.

Learn more about how Pando helps our customers build a culture of growth and equity by making feedback more fair and transparent.