Companies Rethink Annual Performance Reviews

The annual performance review is getting reviewed itself, and has received low marks. Employees say feedback from the review is too little and comes too late to be effective. Now companies are beginning to rethink how they give feedback.

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So it's in this uneasy economic climate that employees in many industries have to sit down for their annual performance reviews. The reviews are a fixture in corporate America, and many employees find them useless. Now companies are looking for better and swifter ways to give feedback. Here's NPR's Wendy Kaufman.

WENDY KAUFMAN: Mozilla, the company that developed the Firefox open-source Web browser, is hardly a stayed, old-line firm. But when it came to performance reviews, it clung to the conventional, yearly ritual.

Mr. DANIEL PORTILLO (Senior Director of Personnel, Mozilla): Employees would write a self-evaluation, the manager would solicit their feedback, and then write a review based on what they've done over the year.

KAUFMAN: But, says Daniel Portillo, the company's senior director of personnel, it was pretty inefficient. Mozilla has now abandoned the annual review, and instead has one-on-one feedback sessions with employees at least six times a year - often every month.

Mr. PORTILLO: If you were really trying to improve and were trying to build a culture of development, all individuals are going to want to ask questions about how they're doing and what they can do to do better.

KAUFMAN: Talent management consultant Josh Berson says the very existence of a rigid, formal review process once a year can actually stifle informal feedback. He says that's what happened at a major airline.

Mr. JOSH BERSON (Talent Management Consultant): People said, oh, well, I don't really need to talk about this now. I can wait until the end of the year. So they went back and they essentially took apart the formal process and re-implemented a much more coaching-oriented process to feedback and told managers that, look, we expect you to do this on a continuous basis.

KAUFMAN: Getting feedback on a continuous basis is something Generation Y employees seem to crave. Young workers in their 20's who've been dubbed the validation generation are often portrayed as needy and whiney in the workplace. Mozilla doesn't see it that way, nor does Daniel Debow, who's new start-up called Rypple provides online tools for workers to get instant and semi-private feedback.

Mr. DANIEL DEBOW (CEO and Founder, Rypple): When you're entering the workforce, you want to get feedback. But the difference with this generation is that they have grown up on a constant and steady feedback from school and work, but also of being much more collaborative and interactive with the people around them.

KAUFMAN: But it turns out that Gen Y-ers aren't the only ones wanting more input from bosses and co-workers. A recent study by the consulting giant Accenture found that a sizeable majority of middle managers valued informal feedback more than what they got from the formal review process. Unfortunately, more than a third of the managers said they didn't get the informal advice they needed in order to improve. Still, David Smith, the managing director at Accenture, suggests that when it comes to feedback and managing employee performance, the ground has definitely shifted.

Mr. DAVID SMITH (Managing Director, Accenture): The norms of the new generation really are driving into the workforce very rapidly. The company has got to look at it different, the employee has got to look at it differently, and really, you know, the middle managers and the management of the organization have to look at it differently.

KAUFMAN: And in these economic times, it's more important than ever that employees get what they need to become more productive.

Wendy Kaufman, NPR News.

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