One of the last sacred cows in businesses--from start-up to mature organizations--is the ineffective, poorly timed annual performance appraisal. It's hated by both employees and managers. The process creates fear and is demotivating. According to Society for Human Resource Management, 95 percent of employees are dissatisfied with their company's appraisal process. What's more, 90 percent don't believe the process provides accurate information.

How can such a critical part of employment become such a meaningless task? In a new eBook about replacing the performance appraisal from 15Five's CEO, David Hassell, explains that its roots date back to the 1900's when employees were treated as replaceable cogs in the business wheel. Labor was viewed as a nuisance needed to achieve business outcomes. The original performance appraisal was a management tool intended to control workers "too stupid to understand what they were doing."

It is time that we all agree that we need to, for once and for all, kill the annual performance appraisal.

Autonomy, Purpose and Mastery

The insulting perspective about people that initiated the now defunct management tool is no longer relevant. Today's knowledge workers expect autonomy, purpose, and mastery to be part of their work life, according to Hassell: "These are table stakes [for any leader] to motivate people intrinsically." Hassell believes that the "table stakes" are what inspire passion in employees, bringing out their talents and strengths. When employees are treated as cogs in the corporate machinery, their talents and strengths are barely used or often go undiscovered. Business results are mediocre.

Evolving the Manager's Role

"The concept of manager as boss is antiquated," Hassell says emphatically. Today's leaders need to be coaches. The start-up CEO goes on to explain that today's leaders need to understand each person's skill and morale levels, and goals. The leader's role today is to unlock people's potential. It's not to control people.

Leaders are stewards. They have no control over people. Instead stewards have responsibility to care for those whom they lead.

Transition Away from the Performance Appraisal

If the performance appraisal is antiquated, what should replace it? According to Hassell there are some key elements to a modern appraisal approach.

  • Hold a predictable cadence of weekly and quarterly conversations with employees
  • Check the pulse weekly on the morale of employees; understand their engagement levels
  • Give employees time throughout the quarter to reflect on performance to improve it
  • Have a formal performance conversation quarterly.
  • Decouple compensation conversations from performance conversations
  • Connect employees to a shared purpose to illuminate why their work matters

I would add that a modern performance appraisal philosophy should focus on helping people solve problems important to them and useful to the business rather than vague conversations about career goals.

Part of the transition away from the appraisal process is a mindset shift. First, it's not a process. It's a conversation. The intention is to help employees become a better version of who they are. It's not to complete documentation required by HR.

65 percent of employees say that the current performance appraisal process interferes with their productivity. 65 percent say the information isn't relevant to their work. These are but a few of the trends leading the way to the annual performance appraisal's demise.

As businesses refine their employee experience, they will need to modernize how they evaluate each employee's performance. It's no longer about pushing paper or a process that positions a leader as commander. As Hassell explains, the performance discussion needs to empower employees to improve month over month, not year over year. "No one would invent the appraisal today," Hassell astutely observes.