New Performance Management System
Replacing Annual Performance Review

Performance appraisal was once the unquestioned way of conducting an annual employee evaluation, the familiar ritual in which employees and managers met to review the employee's performance during the year. If the employees were lucky, they walked away with raises, often tied to a ranking on some sort of rigid, numerical scale. Nobody really liked the process, but in the old command-and-control style of organizational leadership, this seemed like a perfectly appropriate model for measuring performance. But today—with widespread emphasis on teamwork, shared leadership, and an ongoing struggle to find and retain qualified employees—it's a model that is falling increasingly out of favor.

Yet if companies don't do annual performance reviews, what will take their place? More and
more, organizations are turning to systems of performance management. Instead of measuring employees' performance and pointing out where they fall short, organizations are discovering they can achieve more results by finding ways to fine-tune and improve their systems. Some of the major changes between the old appraisal system and the new performance management system are highlighted in the chart below:

Performance Appraisal	Performance Management
Appraisal/Evaluation	Planning, Coaching Appraisal & Professional Development
Backward Look	Forward Look
Once a Year	More Frequent
Paper-Driven	Communication-Driven

The easiest way to begin using a performance management system is to have all members of your organization answer the following questions:

1. What are my major work priorities?
This will help employees identify the "Key Result Areas" of their job. This is not a listing of everything they do, but typically 4 to 6 major contributions their supervisor/employer expects from them during the next 6 to 12 months.

2. How will I know I have accomplished those priorities?
For what outcomes or products will each employee be accountable in each "Key Result Area"? This is typically the end result—something the employees will create or achieve through the work they do.

3. What will I have to do to get there?
What major activities or tasks must the employees do—and by what dates—to achieve the outcome or create the product?

4. How will the work I do fit in with my organization's strategic plan?
All employees need to understand how they fit into the "Big Picture."

5. If I need help along the way, how can I get it?
What assistance, if any, will your employees need to perform the activities or tasks they have listed? Are there any professional development areas they should focus on to help them accomplish their job?

After all employees have answered these questions, they should then meet with their supervisor to determine how often they should meet to discuss, monitor and recognize progress on activities, tasks, or outcomes.

For the past two years, New York-based Merrill Lynch & Co., Inc., has been making the transition from a traditional performance-appraisal system to one based on the principles of performance management. At the beginning of the year, employees and managers set their objectives. Mid-year and year-end reviews follow.

During the mid-year review, the manager and employee sit down to assess the objectives set at the beginning of the year. They look at the employee's progress with an eye toward making any changes necessary to ensure the ultimate success of the plan. They also update whatever kind of personal development plan the employee may have in place.

The year-end review integrates feedback from peers, assesses the employee's progress against business objectives, and identifies the areas in which the employee needs to improve. Throughout the year, managers are encouraged to provide ongoing feedback to their employees about their performance.

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Authored by: Jackie Rasmussen, Business and Industry Specialist, University of Missouri Extension
Source: Creating Quality Newsletter, Volume 10, Number 10, October 2001

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