In a tight labor market where IT companies struggle to fill positions and close the skills gap, it's important to identify and monitor workers' current status and determine where they might rise up the ladder to leadership roles.
Employees want to know, too, what their future might look like within the company -- and often than just once a year. "People want to know where and how they can improve, how they can get better, and the steps they need to take to move up the ladder. But that's harder to do in a company where an annual review is focused on what happened during the previous year instead of what goals and opportunities they're focused on in the future. What are they measured against? What are the expectations? Are they meeting those or not? How can they do better?" says Glen Wilson, director of talent at Salesforce.com/CRM consultancy Internet Creations.
Of course, removing yearly reviews and forced rankings puts more responsibility and accountability onto direct managers and team leaders -- but doing so is much more accurate than putting promotion and firing responsibility in the hands of executive management who may or may not have any direct contact with the employees they're assessing. "With responsibility comes accountability, and getting rid of an annual review process does ask managers to have a lot more input and control over the process. But that's also empowering for the employees and the managers, who know each other best and can deal with shoring up the weaknesses they see and building the skills that are needed," says Barnett.
Error: bad data
The process also highlight one of the biggest issues with annual reviews: a reliance on bad data. "Everyone knows and understands that, to some extent, they're graded on a curve. And they don't trust the reviews and the ratings, the rankings. So many factors are at play; how many people have been reviewed favorably before you? What are they being ranked against? Not to mention the harshness or leniency of the person doing the rating. We've been putting these skewed ratings into our promotion and reward systems based on a completely subjective system -- we don't actually leave it at subjective, we turn our biases and our own preferences into an objective rating system that doesn't measure the person being rated as much as it measures the rater," says Marcus Buckingham, founder and chairman of The Marcus Buckingham Company, a performance management, leadership and coaching solutions firm.
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