Performance Reviews Are Dead: Here's What You Should Do Instead

Anyone who has had the privilege to lead has also had the responsibility of the dreaded annual performance review

We’ve all been through them, but I’ve yet to meet anyone who actually looks forward to a performance review, anymore than they would a root canal. Not only is it stressful for both parties involved but it’s also horribly ineffective. According to the Society for Human Resource Management, and as reported in Slate, “95% of employees are dissatisfied with their company’s appraisal process. What’s more, 90 percent don’t believe the process provides accurate information.”

Worse yet, an Adobe study found that performance reviews have no effect on how they do their job. 

“We’ve Always Done It That Way,” Just Isn’t Reason Enough

So, why do we keep doing them? In large part because we’ve always done them. We’ve been conditioned by 20th Century corporate culture to accept them as the norm. And, to be blunt, most people are just shamed into doing them. “What? You don’t do yearly performance reviews? Are you afraid to?”

And so we’ve muddled our way through them as best we could, all the while knowing something just wasn’t quite right about the awkward and seemingly ineffective process.

However, there’s nothing sacred and immutable about performance reviews. They are a relatively recent phenomenon, having their roots in early and mid 20th Century Industrial era thinking. Elton Mayo, a psychologist and organizational theorists, often considered the father of HR theory, established a model for employee engagement that was an alternative to Frederick Winslow Taylor’s rigid scientific management approach. It was a positive change at the time and it started the trend towards more human-centered performance-based management. 

“Using feedback on performance to course correct once a year, or even twice a year, is akin to trying to navigate a minefield by reviewing your performance after you’ve crossed it…only on this minefield the landmines are shifting underground as you walk through them!”

Then, in the 1950s, the US government’s Performance Rating Act which used the three categories of Outstanding, Satisfactory and Unsatisfactory, along with the Incentive Awards Act, which provided cash bonuses and incentives to government employees, both further cemented the idea of performance-based reviews. 

It wasn’t until 1970, however, that Aubrey Daniels, considered by many to the the father of performance management, coined the term “performance management.”

Since then we’ve accepted the annual performances review as gospel. 

There’s no doubt that performance reviews were a huge step towards not just evaluating employees but also soliciting their feedback. They were an effort to look at employees as people with motivations, goals, and purpose, rather than unfeeling cogs in the industrial machine.

But, as with most industrial era models they were built primarily for scale in large organizations that were rapidly growing. Their rigor, checklists, metrics, and one or twice yearly application was never particularly good, especially for smaller organizations, but we accepted them as just part of the corporate tedium.

Things have changed.  

The Real-time 360

The rate of progress, market and technological change have made a yearly review nonsense. Using feedback on performance to course correct once a year, or even twice a year, is akin to trying to navigate a minefield by reviewing your performance after you’ve crossed it. It’s not entirely ineffective for some, but there will be far more casualties among those who need feedback in the moment. In fact, if you want to bring that analogy up to date; on this minefield the landmines are shifting underground as you walk through them!

But how can you possibly deliver feedback on a daily basis to everyone that reports to you? Especially in a small or medium sized company where time is already at a premium.

Yet, there is one approach that replaces the performance review and aligns perfectly with the pace of change in today’s organizations; the Real-time 360 Review

Just as the name implies, a 360 is intended to provided 360 degrees (a full circle) of feedback from a broad set of perspectives and vantage points. I will warn you that it is a radically different approach. And this is also not the sort of 360 evaluation that only happens once. Those are helpful but only barely, as the still show just a snapshot in time. 

If you have not been through a 360 it is nothing like a traditional performance review. Much of what you get is raw and unfiltered feedback, which you will be tempted to become instantly and intensely defensive about. That’s why you will have to invest heavily in developing an understanding of how it works, committing to it, and developing a culture that supports it. 

The good news is that once you have a real-time 360 in place your team members will have an ongoing instant assessment of their performance in a way that puts any other sort of review process to shame. 

How It Works 

Rather than have one person determine how well someone has performed once or twice a year, a real-time 360 relies on the perspectives of everyone that a person works and interacts with on an ongoing basis. 

This may sound tedious at first, but the reality is that once set up it is infinitely simpler and more effective than any form of periodic performance management. 

There are many apps available to help you put one of these in place. I’m not even going to bother listing them here. If you do a simple Google search of “real-time 360 review” you will come up with dozens of references of providers along with examples of how its being done at major companies such as Goldman Sachs.

A 360 evaluation consists of a standard set of criteria, questions, and ratings that the persons will be measured against. These can vary widely, bit most often will focus on several factors; effectiveness of interactions and communication with others, reliability and consistency, ability to achieve stated goals, and overall performance. 

What is radically different is that you can define the universe of people that will be reviewing other people. In a small company (under 50 people) you could set this up so that everyone is literally evaluating everyone else on an ongoing basis. 

The way I’ve used 360 reviews in the past is to do one broad-based 360 in which every employee within the company will rate all other employees. (If it’s a larger company  you can break it down into departments/operating units/teams. Twenty to no more than 50 people is good since that provides enough data without being a burden.) That baseline is then used to add to incrementally on a daily basis. 

Not everyone will rate everyone else daily. That would be absurd! Instead, everyone has the ability to rate anyone else whenever they desire. Over time the regular feedback creates a trending function that shows how certain behaviors and actions correlate to feedback.

You’re likely thinking, “Sure, who has the time?” But the beauty of it is that since people want feedback they will provide it as a quid-pro-quo. And if set up correctly the time spent should be measurable in seconds and minutes, definitely not hours.

A few things are critical if you are gong to do this:

  1. Have qualified people to review the initial feedback in the baseline 360 with each employee. As I said earlier, seeing yourself in this sort of unfiltered light can be harsh and difficult to rationalize. 
  2. Focus on the value of creating a culture that regularly promotes the value of the real-time 360.
  3. Anonymize the responses. There’s much debate over this point. Some people feel that anonymizing encourages drive-by criticism. My experience has been that some of that will show up, but if the 360 is done right then overly negative feedback will be drowned out by more accurate feedback from many more reviewers. 
  4. Review up as well as down. The 360 is one of best tools I’ve ever come across for the growth and development of leadership skills. Leaders rarely get accurate and unfiltered reviews from those who they lead. The 360 is nothing short of eye-popping for leaders. This is who you are perceived to be, deal with it!
  5. Lastly, recognize and incentivize people for participating in the process. These are not financial incentives but rather acknowledgments for being engaged in the process and supporting it. Be sure to do this in a way that maintains anonymity in order to preserve the integrity of the 360.
  6. Mandate participation. I know 360s irk some people who just do not want to participate, either because they don’t like seeing how they are perceived or can’t be bothered to help others grow. My take on that is simple; I don’t want someone on my team that can’t handle the former or who cannot invest in the latter.

By the way, none of this should obviate the need for leaders and managers to periodically sit down and talk with employees about performance issues, good or bad.  People need to be recognized for their efforts and contributions as well as made aware of ways in which they may fall short. Also, don’t be too quick to dismiss this approach for more manually our mechanically oriented tasks. Unless someone is working in a complete vacuum an awareness of they way they and their performance is perceived is critical in being effective and learning.

360 reviews definitely have their share of haters who feel they are a waste of time. Most of those detractors focus on the traditional “once-and-done” 360 review rather than the real-time method I’m describing. All I can tell you is that in my experience real-time 360 reviews offer unparalleled insight for personal awareness and growth.

The bottom line is that traversing the minefield that is your market can’t be done using the same old and tired tools of the past. The 360 will create a culture that is constantly learning and growing from the shifting obstacles and opportunities that your team needs to navigate in order to learn, grow, and succeed.

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How To Turn Data Into Actionable Strategies

So your organization has a big vision and uses that vision as the North Star for guiding strategic decisions. But when you’re only deploying against vision with no data to back it up, you’re flying blind.

This is where business intelligence (BI) comes in.

There are many definitions for BI, but in a nutshell it’s an architecture and set of integrated technologies, methodologies and processes that translate raw data into meaningful, useful information. And this output is used to enable more effective strategic decision making and planning to guide the organization.

BI is not new. In fact, it dates back to 1865 when the phrase was first introduced in the “Cyclopedia of Commercial and Business Anecdotes” in an article about a banker who gathered information and acted on it before his competition could and realized a profit. And in 1958, IBM computer scientist Hans Peter wrote a revolutionary article “A Business Intelligence System” that described an automatic system for disseminating information to the various sections of an organization.

Today, organizations are using it for the same purposes: forecasting, predicting future customer behavior, improving strategies, identifying new opportunities, searching for hidden patterns, etc. What’s changed is we have tools that now provide deeper data insights.

Why do you need BI?

With BI you’re able to see what happened, what is currently happening in real time, why, predict what will happen in the future, and better identify how to direct or reshape the outcome (what you want to have happen). In essence, BI empowers fact-based decision making.

It also helps ensure everyone on your team –from the C-suite to the sales team and operations to finance –is operating from a single source of truth. That is, rather than having sales using one system, set of tools and rules, and marketing having a completely different set, everyone has insight into the same data sets and information. It aligns decision making across the entire organization.

Most businesses are sitting on a mountain of data already, and BI bridges the gap between data and actionable strategies. For example, BI might enable your sales and marketing team to answer things like:

  • Which customer should we target, when, where and why?
  • What caused the dip in our lead generation last month?
  • What is the most profitable source of sales leads and what elements have impacted that source traditionally?
  • Where does our efficiency ratio drop and how is it impacting our operations?

You’ll also be able to more accurately identify whether that new product or service is worth the risk of launching, when is the best time to launch it and into which market, what the cost should be, etc. BI can, and should, be used across the entire business to make more informed decisions.

Stages of Business Intelligence

Traditionally, there have been five stages of BI: Data sourcing, data analysis, situation awareness, risk analysis, and decision support.

Data sources — gathering information from multiple data sources such as relational databases, analytic databases, and business applications like customer relationship management (CRM) platforms or enterprise resource planning (ERP) software, to name a few.

Data analysis — the data collected from these sources is only useful if you can synthesize it from the various sources and derive meaning from it. This is where you take the information and turn it into knowledge.

Situation awareness — how you put context around the data. It’s observing and understanding the implications of what’s going on around you and forces that may be at play.

Risk analysis — this is where you take what you know (the data – information – knowledge) and utilize it to assess current and future risk, costs and benefits of taking one action versus another. It’s assessing risk versus reward.

Decision support — identify and select intelligent decisions and strategies. Some also refer to this as the presentation layer, which are the dashboards, reports and alerts used to present the findings from the analysis.

At our agency, we’ve further distilled this down to four. We like to think of business intelligence as a systematic combination of reporting, analytics, intelligence, and strategy.

  1. Reporting — what do we see?
  2. Analytics —what does it mean to us? It’s translating what you see into terms that relate to your business.
  3. Intelligence — what do we do? In other words, what do we do about what we’ve uncovered? How do we put the data into action?
  4. Strategy — what is the outcome we want to achieve? Strategy acts as a filter to ensure you’re not just seeing what you want to see, but what’s actually there and use that to guide next steps.

BI gives organizations the ability to gain access to focused analysis at a scale, complexity and speed not easily achievable with traditional operational reporting or spreadsheet analysis. It allows you to go layers deeper, to look at what could be influencing the changes in your business, and even stay one step ahead of those potential changes to mitigate risk.

According to Cindi Howson, research vice president at Gartner, “There is a need for reporting, but reporting alone is not enough. If you’re only doing reporting you’re behind already. Unless your reporting is smart and agile, you’re behind. You’re a laggard.”

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With Easy Ride trial, Nissan takes new step toward being Uber competitor

YOKOHAMA (Reuters) – Facing a future in which self-driving cars may curb vehicle ownership, Nissan Motor Co is taking its first steps to becoming an operator of autonomous transportation services, hoping to break into a segment set to be dominated by Uber Technologies and other technology firms.

In partnership with Japanese mobile gaming platform operator DeNA Co, the automaker will begin public field tests of its Easy Ride service in Yokohama next month, becoming among the first major automakers anywhere to test ride-hailing software developed in-house, using its own fleet of self-driving electric cars.

Easy Ride, which Nissan plans to launch in Japan in the early 2020s, is meant to feel more like a concierge service on wheels, making – for example – restaurant recommendations while the car is on the move.

The announcement follows an agreement by Nissan and its automaking partners Renault SA and Mitsubishi Motors Corp earlier this month to explore future cooperation with Chinese transportation services conglomerate Didi Chuxing.

These moves mark a push by the automaker to avoid becoming the “Foxconn of the auto industry”: a mere vehicle supplier to ride- and car-sharing companies.

“We realize that it’s going to take time to become a service operator, but we want to enter into this segment by partnering with companies which are experts in the field,” Nissan’s chief executive, Hiroto Saikawa, told Reuters in an interview this month.

A person close to the deal has said that the agreement is intended to explore opportunities for Nissan and others to supply battery-electric cars to Didi Chuxing for a new electric car-sharing service it is setting up in China.

He noted however that Nissan and its alliance partners could explore a broader agreement, which might possibly involve Nissan providing self-driving taxi technology to the dominant Chinese ride-hailing service.

NICHE MARKET

A self-driving vehicle, based on Nissan Leaf electric vehicle (EV), for Easy Ride service, developed by Nissan and mobile gaming platform operator DeNA Co, is seen during its media preview in Yokohama, Japan, February 21, 2018. Picture taken February 21, 2018. REUTERS/Toru Hanai

Creating an upscale autonomous taxi service, rather than trying to beat other companies on price, could help Nissan against bigger competitors like Uber, market experts say.

“By doing something with a more premium feel, it could allow Nissan to charge more for its service and potentially relieve some of that profitability pressure they could face if they were to try to race to the bottom in terms of pricing,” said Jeremy Carlson, automotive analyst at IHS Markit.

Automakers are looking for ways to profit from the rise of car-sharing services, which along with self-driving cars, are likely to lead to a decrease vehicle ownership and chip away at future profits.

Slideshow (4 Images)

IHS Markit expects global sales of autonomous vehicles will soar to more than 33 million units in 2040 from 51,000 in 2021, while Goldman Sachs has predicted that the ride-hailing market will grow eightfold by 2030 to be five times the current size of the taxi market.

Nissan has embraced new technologies, launching the Leaf, the world’s first mass-market electric car, in 2010. The company was an early proponent of self-driving cars, pledging in 2013 that it would market fully autonomous cars in 2020.

Although it has been rolling out automated highway driving functions and self-parking capabilities in a growing number of its models, rivals ranging from Tesla Inc to Subaru Corp have installed increasingly advanced self-driving features in their cars.

GM and Daimler AG are building and expanding car- sharing services, and GM has said it plans to launch a self-driving taxi service next year.

Nissan also has its own car-sharing service using its ultra-compact battery electric models, but after years of trials, the service is available only in Yokohama, home to the automaker’s headquarters.

After bringing in Ogi Redzic, who previously led the automotive business group of mapping data firm Here Technologies, to head Renault-Nissan’s mobility services division in early 2016, Nissan in the past year or so has begun to gear up its strategy to compete in the new transportation area.

Its partner DeNA is one of the world’s biggest social gaming networks with 30 million users. The company’s expertise in developing real-time user interfaces and payment systems will help give shape to the taxi service platform.

The company already operates a user-sourced car-sharing app in Japan, and had been developing a self-driving taxi system with a Japanese robotics start-up before teaming up with Nissan.

Additional reporting by Norihiko Shirouzu in BeijingEditing by Gerry Doyle

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