A recent study reports that 69% of millennials think that the annual performance appraisal model is flawed. The one-off approach is simply not working in today’s fast-paced, ever-changing world where it is estimated that, on average, millennials will change jobs seven times in their career.

Many organizations are evaluating the effectiveness of their performance management systems, realizing that the traditional performance management system (once per year review) breeds, at worst a pass/fail/maybe mindset to, at best, a sense of mediocrity. This is often expressed as a “ho-hum” bureaucratic process that adds little value. The once a year approach means that people and managers are often disengaged. For managers, they often dread the performance appraisal cycle. For the not so well performing employee, it can often mean that they are blindsided which results in confusion and resentment.

Bad performance management is costly as it affects workforce productivity where one’s goals and objectives may not necessarily align with the organizations. Because of this, it fails to encourage personal best performance.

What these millennials want is a way to receive meaningful feedback and the opportunity to develop and grow.

It’s unfortunate that in my career I have all too often seen the worst of the once a year approach where staff, both front line, and executives were given an outstanding or good review year after year. Then, when a new manager/CEO takes over things go awry. It turns out the individual wasn’t doing a very good job and was never told so. This type of blindsiding has a very negative effect on both the employee and the organization. If this is a senior person, it can shake the organization to its core. It fails the employee and the organization. These situations are unfortunately all too common and are both sad and unfair for the organization and the employees. They can also be very costly if the individual must leave the organization.

This approach is not consistent with a value based, vision-driven, and participative work environment which is why organizations are putting in place forward-looking, inclusive, effective performance management systems.

An effective performance management system is, at its core, based on the uniqueness of each organization – it’s culture, it’s business and its mission. It is fundamentally based on the organization’s strategic direction and aligned with its mission and values. It is a core organizational strategy that encompasses timely and meaningful feedback and interaction. It allows for measurement of performance, reward, and recognition which keeps employees engaged, motivated and inspired by their work and the work of the organization.

Making this shift is not easy. Boards of Directors must support the direction, and no one can take their eye off the ball. It is not only about changing processes or tools. It requires a significant change in the organizational mindset where a leader’s role is to facilitate performance and to deal with problems very early in the game. It requires training, development, and most importantly it requires leadership.

By Susan Bihun

NFP Governance & Management


Visit Osborne-group.com for other Principals’ ideas and opinions on a range of topics. The Osborne Group provides interim executive management, consulting and project support across all sectors and over a broad scope of service areas.

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