More companies ‘to ditch yearly performance reviews’ – PwC

More large companies could scrap annual performance reviews in a bid to improve employee engagement, according to a new report by PwC.

The firm’s 2015 Performance Management Research, which surveyed 100 UK-headquartered groups and 1,000 employees, found that businesses find the year-end process frustrating and two thirds are adopting a culture of continuous feedback.

But PwC warned this could impact staff bonuses, with more than half (53%) dependent on individual performance reviews.

Alastair Woods, director in PwC’s reward team, said:

There have been a number of high profile global organisations getting rid of year-end performance reviews and ratings and we are aware of a number of other companies considering this move.

While this may be the right answer for some, the focus on ratings is a red herring – it is how performance management is carried out that really counts. The real problem has been that performance management happens just once a year.

The report also revealed that the more than two thirds (67%) of employee respondents said the year-end review was useful, with 48% stating it made them think about their progress.

Organisations should be focusing greater attention on equipping managers with the appropriate skills to deliver effective and motivational performance conversations on an ongoing basis and creating a culture where employees can grow and develop.

Without the year end rating, the danger is that the distribution of pay and bonuses can become even more of a dark art as shadow systems evolve without proper governance and infrastructure behind them.

 Petaurum Solutions’ Comment

Measuring performance is a business-critical activity to ensure employees are meeting the ever-changing requirements of their business.  Rigid processes that are over-engineered, too complex or happen only once a year are never likely to be agile enough to cope with the demands of modern day business and it is unsurprising that PwC, like the recent study by the Top Employers Institute reveal a shift towards a continuous assessment process.  The best advice we can offer is “keep it simple” if you really want to embed performance management into the daily activities of your managers.

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