Ditch Annual Performance Reviews. Here's How Netflix Did It.
We continue the search for pioneering workplace practices. We visit companies. We talk to academics. We interview CEOs, entrepreneurs and employees. Our aim is to learn how to make work more fun. The results are on our ever expanding Bucket List.
One place we haven’t yet visited in person is Netflix. However, we are inspired by the book “Powerful”, written by Patty McCord, their former Chief Talent Officer. And one key reason is because of how they give feedback—including how they ditched the frustrating annual performance reviews.
Before returning to Netflix, let’s step back and take a look at….
The annual misery
These are common. Once a year, a manager sits down with subordinates to rate their performance. And these sessions usually trigger stress, frustration, or resentment. Here’s why:
They are late - by definition
It doesn’t make sense to wait months to give feedback. It’s most effective when it’s timely. Why should you delay supporting the growth of a colleague? Why not support their improvement, now?
They are meaningless
When review time comes, you first check the goals that were set. This may be the first time anyone looked at them in a year.
Worse, you likely realize a few other things:
- You haven’t reviewed your goals for a year.
- They are not relevant any more. Things have changed.
- You may be assessed on things that now make no sense.
- It’s like waiting a year before reviewing your New Year resolutions.
Annual performance reviews are always late. It doesn’t make any sense to wait months to give feedback. Why should you delay supporting the growth of a colleague? Why not support their improvement, now?
They waste time
Managers spend too much time on reviews that have little or no effect. Why not spend that time supporting employees, and removing the barriers in their way?
They annoy everyone
Let’s be honest: nobody likes annual performance reviews.
- Managers dislike the bureaucracy and, especially, the discomfort of choosing one digit to describe a team member’s performance.
- Employees hate them because it’s largely a one-way street. They are there to hear how their manager assesses their “performance”.
Is it any wonder it’s rare for annual reviews to work well? Isn’t there a simpler, better way to give feedback?
A simpler better way to give feedback
Which brings us back to Netflix. They chose to ditch the annual review. Now they give feedback in a much simpler way.
Patty McCord said in an HBR article: “When we stopped doing formal performance reviews, we instituted informal 360-degree reviews. We kept them fairly simple: People were asked to identify things that colleagues should stop, start, or continue.”
Netflix now uses regular, but informal, reviews in which people hear what they should stop, start, or continue—from their colleagues.
It’s simple. It’s actionable. And it includes something often overlooked, which is praise for stuff they do well. Now, via this simple practice, it gets the attention it deserves. We’ve seen similarly simple practices at other organizations.
Many started doing these reviews anonymously. They felt people might be uncomfortable with full transparency. Netflix did, too.
Why do we still waste so many hours on horrible and ineffective annual performance reviews?
But after a while, almost all opt for transparency. As Patty McCord said: “In the beginning we used an anonymous software system, but over time we shifted to signed feedback, and many teams hold their 360s face-to-face.”
Stop, start, continue
So, here are 3 questions for you, dear reader, about your performance review process:
- What should you stop?
- What should you start?
- What should you continue?
Challenge yourself. You might just end up agreeing with Netflix: do without the annual performance review completely!
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Six years ago, we created our Bucket List of organizations, entrepreneurs, academics, and business leaders who changed the status quo of frustrating workplaces by becoming pioneers, rebels, and revolutionaries. Since then, we have been checking off our list by visiting pioneers all around the world. We share everything we learn from them through our articles here and in our Academy. However, we haven't been able to make any significant Bucket List travels for the last two years for obvious reasons. This is finally changing—we are going to Japan!