It’s time to update the traditional performance review, which focuses largely on how the employee performed the prior year and whether they met agreed-upon goals and expectations. The annual performance review not only fails to motivate most employees but also can lead to anxiety, resentment and an erosion of the manager-employee relationship.

“Our biggest challenge in the modern workforce is that we have chosen the route of treating people like children to make it simpler to handle large groups of people,” said Grace McCarrick, “The Culture Coach.”

That’s why so many people these days seem to be rebelling against the idea of work, she said. “People are so angry at companies; they’re so angry at corporate…So, I think this treating people like children has really come back to bite us in the butt.”

Traditional yearly performance reviews are part of the problem, she said. They’ve become a “systematic way that we can just, with a big group of people, try and tell them what’s not working and get them to work better moving forward.” But that only works in theory.

“Our biggest challenge in the modern workforce is that we have chosen the route of treating people like children to make it simpler to handle large groups of people.”

Grace McCarrick

“People focus on digging out the negative—let’s dig up all the problems so we can put them on the table and everyone can look at them and sort through them. I’ve never found it to be effective,” she said.

McCarrick, an executive coach, and the leader of the talent practice of a property/casualty insurance each offered their views of alternatives to annual problem-focused mindset that they believe are more effective during recent interviews with Carrier Management.

Regular Conversations

Instead of a one-time review, speaker and leadership coach Marcel Schwantes urges his clients to take “more of a coaching and mentoring approach,” with regular conversations and quarterly sit-downs “so that there are shared goals and expectations along the way, there are clear markers for performance, [and where] feedback is a two-way street.”

When the review is treated as an “annual tick-the-box procedure,” it is sometimes put on the back burner by busy managers, he said, which could result in some last-minute scrambling and guesswork. In that situation, “you don’t have data to know what to even talk about. You may not have the right measures in place for evaluating your employee based on a really robust competency model. So, you can’t sit down and say, ‘OK, based on this area of your job, we felt that you came up short.'”

“You never want to sacrifice the human side of leadership and throw that to the gods of AI…People still need that connection with their bosses.”

Marcel Schwantes

“You want to equip employees to always be on track to getting an ‘A’ at the end of the year,” Schwantes said, “and that comes through more frequent meetings and checking in.” This approach eliminates uncertainty and anxiety for employees and allows for open and transparent communication between managers and employees, he believes, which makes for a “more human approach to leadership.”

There also needs to be an open-door policy and a safe environment where employees know they can come to their manager with problems and concerns, he said. He noted that the expectation of transparent communication needs to be set during the interview process and throughout onboarding. “That opens up the avenues for employees to feel safer and to know that if they do speak up, they’re not going to be reprimanded for it.”

Schwantes said technology also has a place in the review process—but it needs to be married to the human side of leadership.

“You want to leverage the strengths of AI for things like performance improvement and even taking a sentiment of employees on a regular basis” through pulse surveys, he said. “But you never want to sacrifice the human side of leadership and throw that to the gods of AI…You can throw some parts of management to AI to be more efficient, more accurate and capture the right data, but the human side of leadership is the one that speaks to emotional intelligence and empathy and advocacy in believing in others and having patience to deal with constant change. Those are all human leadership traits that I don’t think AI can replicate.”

“People still need that connection with their bosses…that human interaction [with the] person that is there to give you assurance and remove obstacles from your path and provide you with guidance,” he said. “The role of that manager is so prevalent in the success of an employee…But managers can utilize AI to do some of the stuff they hate [and] make them better.”

Knowing What Good Looks Like

At PURE Group of Insurance Companies, performance reviews are part of a larger performance management strategy aimed at ensuring that every employee knows what is expected of them and has the tools to succeed, said Chief Human Resources Officer Katherine Richardson.

“The language I use is to know what good looks like—to know what good looks like in their role and to feel like they have both the competence and confidence to do their job well.” Performance reviews are a tool to help us “make sure that every single person at PURE knows clearly what good looks like and has the tools to try to deliver on that,” she said.

“There’s no point in looking back unless you’re doing that to help improve the forward.”

Katherine Richardson

Like Schwantes, Richardson believes that having “frequent high-quality conversations” is essential “in order to build trust and to align on expectations, and to over time have a relationship that allows for an honest exchange between a manager and an employee about what’s going well and what skill is still being worked on.”

She said that managers are trained on how to have regular check-ins with their team and are given conversation guides to ensure those discussions are meaningful and provide a useful exchange of information. These conversations can happen weekly, monthly or quarterly, depending on the needs of the team.

Richardson said these frequent check-ins are the “backbone” of PURE’s performance management strategy. There are also more formal components, she said, including a midyear check-in “where a manager and employee speak about where they are, how things are going, giving a lot of time to redirect if things are off track,” and then an annual review to recap the year and get ready for the next.

“There’s no point in looking back unless you’re doing that to help improve the forward,” she noted. “So, the quality check-ins are just to make sure that we are giving real-time redirection and shouting out good work when we see it. If we see that there’s a gap between the aspiration and our reality, we want to be able to address that quickly. Then the full-year review is to put a bow on the end of this whole year’s worth of conversations to say that this is where we’ve gone…It’s never a gotcha, and the performance review in itself is not an outcome. It’s just a tool along the way.”

The most important aspect of the review process is “all the foundational work that comes before it because if you don’t focus on everything up until the final documentation at the end of the year, then it all becomes a discussion about a score—and that is the last thing we want,” Richardson said.

While PURE employees are given a rating to show the overall impact their performance has had on the organization, it’s important not to focus too much on that label of “meets expectations” or “exceeds expectations,” she said. “It becomes too simple of a discussion. And the reality is that most of us are good at many things and are working on some things…The only reason you give a score is to help somebody have a simpler view of how they are ranking against our expectations.”

It’s important to get employees to support the performance management process, Richardson believes. One basic way PURE does that is to make sure employees believe the process is fair, she said, noting that the insurer has a “very robust calibration process…Prior to the finalization of any performance reviews and any scores that we might assign to an individual, we get the senior leadership team together with me and with people from the HR team to really talk about what lens we were looking through when deciding what good looks like,” which she said helps to minimize bias. “There are some [managers] that are harder graders, and easier graders. And people have different motivations for being one or the other. Calibration helps us say, ‘OK, when we’re thinking about this job and the 37 people that we have with similar responsibilities, how are we going to look at it? What is important?'” Depending on the department and role, managers need to decide “whether or not the outcome is what you should be rated on or your efforts toward achieving the desired outcome.”

“Sometimes the difference between winning and losing in insurance is whether the wind blew,” she noted, referring to an uncontrollable outcome.

“So, we try to talk through with jobs that have similar responsibilities. What lens are we going to look through when we decide what great looks like so that we can make sure when we do assign ratings that it’s fair—and that you can have confidence that that rating is a reflection of the underlying performance of the individual, not whatever might be motivating the manager to pick that rating.”

Employees also need to have a voice in the review process to find it truly valuable, she said. “Each employee is encouraged to give their manager the names of a handful of people who they believe would offer a good reflection of their contribution.” That way the manager also has the “employee’s view of where they did their best effort.” There’s also a component that allows employees to share feedback in how well their manager did in making sure they were provided the tools to succeed, she said.

Focus on the Bigger Picture

McCarrick aims to provide managers and employees with better tools to expand the career journeys of employees—without resorting to the ineffective processes of digging through lists of negatives and problems that need to be corrected.

“What I do find is effective is someone saying, ‘I loved the way you did that yesterday. Can you do more of that? Can we figure out how you do more of that every day?'”

“That sort of focus on what is going well, especially in complex teams, I find to be the most effective and the most productive.”

McCarrick developed a performance review supplement companies can use to help employees understand “where they are in their journey in the company’s journey.” It’s a 30-minute check-in that involves five statements and two questions.

Statements:

• Here’s the team’s bigger picture for the rest of the year.
• Here’s how you fit into the team’s bigger picture.
• Here are the top three most useful skills you are bringing to the table right now.
• Here’s the character arc that I, as your manager, think could be really cool and powerful for you (i.e., I see you going from this role with this skill set to this role with this skill set).
• If you were able to sharpen up these three skills, the team would benefit hugely.

Questions:

• As your manager, what kind of guidance do you need from me right now?
• What is the professional character arc that you are most motivated by at the moment?

“The first thing that everyone needs to understand is: Here’s the team’s bigger picture for the rest of the year,” she said. “If you want everyone to be rowing in the same direction, they need to know what that direction is.”

And then they need to understand what role they play in accomplishing that larger goal.

“It’s really about telling the person where they fit into this picture, what they’re providing that’s useful…and how can we expand on that? How can they be even more useful? How can they grow more here?”

McCarrick said these supplemental reviews should be held quarterly—for employees who are performing well. “You want to have a regular check-in about where everyone’s going, how sure everyone feels of where they’re going, how useful everyone’s energy is, everyone’s effort is.”

However, there should be a weekly check-in for employees who are not performing. “You should never get to this review with a surprise bunch of information that they are not performing. In fact, this review probably shouldn’t happen if someone is a really low performer.”

Meet People Where They Are

McCarrick believes it’s important to “meet people where they are,” which is why she chooses to use character arcs to describe an employee’s journey at work rather than typical company jargon such as mobility or development.

“A lot of my work has been focused on pulling people out of a work mindset to help them create a different perspective around what they’re doing…I go the other direction,” she said, noting that she’ll ask something like, “Did anyone watch the ‘Love Is Blind’ reunion [on Netflix]? OK, remember how this person did this? This is the type of interaction that we want to avoid because of the way our business works, blah, blah, blah.”

“I think you have to meet people where they are, talk to them in the language that they’re talking 70 percent of the rest of the day…That’s how I have been able to have a lot of my work resonate with teams of all levels, all different types of industries.”

McCarrick said she loves movies, TV, books, and she think the characters “are created to be archetypes. So, they’re actually sort of custom-made in many ways to be able to be useful when we talk about dynamics at work”—to describe the persona and energy the employee is putting out there. “I think of character arc is how you’re presenting yourself to help others understand how to interact with you. For me, that’s really easy to ideate in a character like a movie.”

As an example, McCarrick describes a newer employee being like Andy from “The Devil Wears Prada”: She’s “so nervous, fumbling the phone, grabbing the coat, not asking the right question. She really wants to please, she really wants to do a good job, but she’s so in her head about what she’s doing right, what she’s doing wrong, [that] she doesn’t know anything. She’s so insecure that she’s actually not doing a great job. So, the intention is there, the work ethic is there, [but] the execution is missing because she’s too caught up in herself…”

Contrast that with Andie from “How to Lose a Guy in 10 Days,” who has been in her career long enough to have an established magazine column and the confidence to handle even the craziest assignment. McCarrick said that her 25-year-old self, who was receiving the performance review in her example, “would’ve been really motivated by someone who worked that closely with me saying, ‘I see you making this jump. I see that you feel nervous right now. I see that you feel insecure, but I see you getting past that…'”

Telling an employee, “I see you making this arc, I see you making this leap between how you feel now and how I think ideally you can really present as a leader in this company, as a high performer in this company,” is so much more motivating that simply saying, “You need to be more confident. You need to be more secure in how you present things,” she said.

Look Them in the Eye

All three experts agreed that performance reviews must be conducted face-to-face—whether that means in-person or via a video conferencing app like Zoom or Microsoft Teams.

“This is where the human side of leadership really has to show itself,” Schwantes said. “If you don’t value a leadership culture, then go ahead and use your email, but you’re always going to run into the same roadblocks. People may misconstrue text-based messages, and you lose the nuances of body language.”

“I would absolutely make sure this performance review is done eye to eye,” said McCarrick.

“And I would definitely do this with your team members quarterly,” especially for those who are remote.

“If you have a reasonable number [of team members] and you work in a remote setting, I would say that you need to check in at least once a week or once every two weeks,” Schwantes said. “And that’s not doing a performance review type of check-in; that’s just regular communication to keep the ball moving forward and making sure that they’re on track.”

“The biggest issue with remote work is that we just don’t have enough data about each other,” added McCarrick.

She talked about the “bank of goodwill” that exists between people, which fills up easily in the workplace where we run into someone in the elevator or the break room and have a short chat, catching up on our lives outside work. We have regular, random “interactions where we learn things about each other and we confirm a relationship—and build up all this goodwill.”

“It takes about three months of not seeing each other for that bank to deplete,” she said, noting that a full bank allows us to give each other the benefit of the doubt and not take critical feedback as a personal attack. “If the bank of goodwill is depleted and you and I are in this virtual meeting, and you say something [negative], I’m like, ‘eff this one, she’s coming for my job.’ And then I’ll get all stirred up about it, but we don’t ever see each other for that to be able to diffuse.”

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This article is featured in Carrier Management’s second-quarter 2024 magazine, “AI and Social Inflation.”

Related articles include:

• Avoid Employee Turnover by Asking 5 Simple Questions
• Reimagine Talent Practices to Unlock Human Potential
• ERM and Strategic Scenario Analysis: A New Way to Think About Innovation

All of the articles in the magazine are available on the magazine page of our website.

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