Annual review: genuine tool to motivate or tick box exercise?

Controversial title, perhaps, but those of you who have worked with me will know that I put a very, very high value on activities that support people growth and development.  Every large business I have worked in has missed opportunities to during the quarterly and annual appraisal processes to reward, motivate and define responsibilities for their people.  At times, it becomes a mechanical, tick-box exercise to manage internal squabbling and intra-departmental politics, ending in a turbulent few weeks where managers make a play for the biggest pot of money you can to give your own team a better pay rise.

Despite a managers best efforts, their teams will see this unfortunate series of events, and by the time the review scores and announced and the pay rise notification is handed out, rather than this being an opportunity to celebrate success and hard work, it feels like a grumbling apology and a shoulder shrug.  So why do so many business get it wrong?  And does your annual review process really have to end with such a fizzle rather than a fantastic fanfare?

Let’s start with understanding whether your business is doing a good job of annual reviews, or whether for the sake of your staff, you need to up your game in this area.  So what are the signs that your annual review process is working?  This isn’t an exhaustive list, but these factors can be seem in businesses with high employee engagement.

  • Internal promotion: watching your team members grow and flourish, blossoming beyond your team to new parts of the business is a sure sign of a healthy culture, engagement employees and an effective review process.  The process helps celebrate successful deliver and help the individual grow skills to move up through the business in a structured and sustainable manner.
  • Key hire retention: Whilst by itself, tenure can be as much of a negative indicator as a positive indicator, when coupled with these other factors, retaining key hires over a decent length of time shows that they are being well managed, with an effective review process to support the individual’s delivery and growth.
  • Innovation and new initiatives: No business can stand still, and the need to innovate from within is an accepted aspect of business growth.  If you are seeing new ideas bubbling up from all levels of your business, your progressive and open culture is encouraging team members to go beyond their core objectives and address business challenges.  Conversely, if you are having to pay external consultants or high ever more senior staff to address you business concerns, a poor annual review process may well be focusing your people too narrowly to be innovative in their work.
  • Active colleague referral scheme: Recruitment costs suck – 10%, 20% even 30% fees to agencies, not to mention the time and effort you need to input to manage these relationships.  A healthy stream of internally referred candidates, effectively “pre-vetted” by colleagues saves time, reduces risk and reduces cost.  In a business with an effective annual review process, as opportunities arise, team members feel confident to bring in people they like or care about, because they see a future in the business for themselves, and the person they refer.

So what are the signs that your annual review process is not working?  Here’s a few from my own work experience!

  • Frequent out of cycle pay discussions: When we accept a job, very few people are already thinking about how they can increase their salary in the short term.  In some businesses, you could wait almost 2 years for a pay rise, dependent on when the pay cycle occurs and whether you are excluded from a pay rise in your first 12 months of employment.  So when you find your team setting up meeting to unhappily talk about out why they want more money, this is a strong indicator that your quarterly and annual process is failing – to manage expectations, or give confidence to the team that hard work will be rewarded.
  • Low number of internal candidates for vacancies: Over time, new roles arise, be that through attrition, or new requirements.  Whilst most businesses have an internal referral scheme, not a lot track how well it’s working.  Likewise, when internally publicised roles consistently fail to attract many internal candidates, this might suggest that their is low confidence in you annual review process, with candidates doubtful that a change of role will lead to a better outcome for the individual at the end of the year.
  • Unchanging levels of employee engagement: For some, the obsession is the absolute number – comparing how engaged their workforce is with competitors.  For me, the trend is a more fundamental indicator.  Many people are fearful of being honest in employee satisfaction surveys, instead giving the same score year after year.  This suggests that in their role, they don’t feel like anything has or can change. This will invariably be reinforced by a “conveyor-belt style” annual review process.  It’s just another tasks to be completed, zero passion, zero engagement.
  • Levelling exercises: My ultimate nemesis in the annual review process is where managers are forced to modify scores due to either poor performance from a more senior manager, or due to pre-set internal standardisation of scoring patterns.  This is where “Barbara Clipboard” reigns supreme, wagging their finger and swatting away any discussion.  This outdated and disrespectful practice means that managers are forced to give scores that do not reflect the individual performance, often having to lower a performance score at the behest of their boss.  An annual performance review process should ACCURATELY reflect performance, especially for more junior colleagues who have little ability to influence top tier business metrics like revenue and growth.

It’s high time that the reporting and measurement of your people and their deliverables is split out from the money your CEO / CFO / shareholders will allow you to award your people each year.  As long as the annual review process is inextricably linked to more money,  personal motivation and development will always play second fiddle.  I can honestly say that in my career to date, I don’t remember a single annual pay rise letter, but I feel my chest swell with pride when I think about some of the best career achievements I’ve had.  Although it may be difficult to do, every manager owes it to their team to make sure that the annual review process reflects the person’s development achievements, and not just their contribution to the bottom line.

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