CEOs and HR pros don’t agree on what the best performance review process looks like. But there’s plenty of consensus about the worst one.

It’s an annual check-in where supervisor and employee alike have nursed months of unspoken grievances. Lots of paperwork. Impersonal rankings. (Congratulations! You’re a 4.) A conversation that’s half-heard—until the part about raises. Make-work goals for the next year, after which the creaky cycle starts again.

It’s enough to make CEOs and HR chiefs want to dispense with performance reviews entirely. And in recent years, the trend in the corporate world has come close: Companies like Deloitte and Adobe have abandoned old-fashioned, rankings-based reviews in favor of systems that are more streamlined and iterative.

Renee Tibbetts, director of administration at the Association of Legal Administrators, was inspired by such companies four years ago, seeing how ALA’s ranking system was eroding morale.

“Feedback was given way too late, and it was a surprise for employees to hear about something that happened six months ago,” she says. “Staff would feel that they were being punished for something they didn’t even realize was an issue.”

ALA’s new process, based on more regular feedback and “360” peer assessments, is a work in progress. But associations have discovered that even small tweaks to their processes can reduce time-consuming reviews, de-stress employees, and, most important, encourage the best talent to stick around.

Who Needs Reviews?

In 2000, when Robert F. Nelson, CAE, founder and president of Nelson Strategic Consulting, was president and CEO of the National Coffee Association, he decided he’d had enough of performance reviews. He had concluded that the time managers spent laboring over descriptions of accomplishments and vaguely articulated goals should be dedicated instead to getting at the core issues of supporting employees: Catch them doing great work and have a plan in place when they’re underperforming.

The new system demanded more regular interaction between employee and supervisor. If something wasn’t clicking, the supervisor initiated a performance improvement plan with the underperforming employee (see page 71). But more time was spent emphasizing good work, a process Nelson knew he had to demonstrate himself by giving on-the-spot feedback.

“If the CEO actually does engage in the behavior, not just talks about the behavior, I think that goes a long way to get other people engaged,” he says.

One argument for keeping annual performance reviews is compensation: Associations usually budget annually, so it makes sense to handle salaries once a year as well. But at the Institute of Real Estate Management, CEO Russell C. Salzman, CAE, and Human Resources Director Stacy Prichisky have made a point of decoupling performance evaluations—which now happen quarterly—from salary discussions.

“I think one downfall of doing the annual performance review was that people were not listening to what their supervisor was saying,” Prichisky says. “Most staff focused on what [raise] they were going to get.”

Because the performance discussion happens regularly, merit raises should come as no surprise. Prichisky encourages supervisors to keep such discussions both brief and separate from performance conversations.

“The supervisor will be sure that you’re clear on what is expected of you and what success looks like,” Salzman says. “We encourage the employee to ask for feedback if it’s not clearly being given. We ask them to be prepared and to talk about questions, ideas, or concerns at the intervals that each supervisor and employee choose.”

Culture Shift

Ken Doyle, chief operating officer at the Smart Electric Power Alliance, has embraced Deloitte’s approach to performance reviews, which reduces conversations to four questions. (“Is this person ready for promotion today?” for instance.) But because goals and needs change often, he emphasizes posing different questions, and posing them more often, to keep the supervisor-employee relationship fresh.

“Some people will be more receptive to one type of conversation than others,” he says. “If we’re asking qualitative questions for quarter one, and we’re dealing with creative people who may not be comfortable with that, in quarter two we’re dealing more with creative questions that they are comfortable with.”

Is a quarterly performance review more time-consuming, even with less paperwork? Doyle assumes so but says that overall the process is less wasteful when it comes to creating a unified workplace culture. “If I look at it along the way, then I can make midcourse corrections, which will actually make it work,” he says. “To me, it is much more productive. It’s also easier to do because the time chunks are smaller.”

ISACA, an association of IT governance professionals, has a similarly iterative approach. Senior Director of Human Resources Liz Santilli says that leaders who stress the value of the new process will make it effective for supervisors and employees alike. If supervisors aren’t on top of those routine conversations, the system doesn’t work.

“I’m a strong believer in over-communicating,” she says. “You need to map out what that change management is going to look like, so that you stay true to the calendar of events as they’re coming up and you are making the time to ensure that the employees understand. Because everybody gets really busy, and it’s very easy to say, ‘Yes, we meant to do that, but didn’t do that.’”

Ready for 360?

The staff involved in performance reviews differ in more ways than rank (supervisor and employee). There are new and long-tenured employees, introverts and extroverts. Those distinct temperaments became clear to ALA’s Renee Tibbetts in the past year as the association tested a process for “360” performance reviews, where employees were assessed by both supervisors and peers.

Employees who had been at ALA longest were the most concerned about the new process, but Tibbetts says that spoke to precisely the cultural changes that 360 reviews can help bring about: breaking down silos and building trust. For the first year, ALA took a modified approach: 360 reviews were given anonymously, and employees were allowed to choose the colleagues to whom they gave feedback. (Managers had discretion to add or change selections.)

“People were worried that it would be a sort of nitpicky, but it’s not a popularity contest,” Tibbetts says. “In terms of the strategic plan we’d set forth, one of our goals was highly engaged talent.”

That first year, she says, a “vocal minority” wanted more transparency about who was giving feedback to whom during the 360 process. Now, that number is increasing. No decisions have been made yet, but she’s confident that the staff will see the value of the process once it becomes clear that it’s not meant to be punitive—that, indeed, it can help build trust.

“Some people are uncomfortable bringing something to the forefront. Everybody wants to be nice and everybody wants to be liked,” Tibbetts says. “But at the same time, you can fall into a passive-aggressive behavior pattern if you’re not addressing the issues that you need to overcome.”