An Agile Approach to Employee Performance Reviews

Agile and Lean approaches are - at their cores - about setting up short, effective feedback cycles.

Development teams move quickly to produce something that they can use to elicit feedback from users or potential users, and then use that feedback to mold the product iteratively. The shorter the time interval between feedback cycles, the lower the risk, the less the waste, and the better the quality or “fit” of the product to the need. Conversely, when too much time passes before feedback is obtained, risk and waste increase.

In my book The Art of Business Value, I explore the importance of inspect-and-adapt and provoke-and-observe feedback cycles in determining the way a company interprets business value. But I’ve found that the fast-feedback principle applies widely in plenty of operational areas outside of IT product delivery.

The Power of Short Feedback Cycles

I was struck by this recently as we moved through our end-of-the-fiscal-year-beginning-of-the-new-fiscal-year annual HR exercise. So much of our business cadence is based on annual feedback cycles, but how much waste is hidden in this snail’s-pace feedback rhythm?

Take annual performance reviews, for example.

At the end of each year we are asked to judge each of our employees - in our case giving them numerical rankings on a scale of 1- 100 or 1 - 5 depending on their position. On this annual cadence, the process is necessarily more about judging the person rather than the performance; it is extremely difficult to relate the rankings to specific behavior. Examples drawn from the year past are selective and biased - in fact, tainted by a selection bias - and any employee is likely to feel that their supervisor’s examples are countered by plenty of other examples that have gone unmentioned.

Will the employee’s performance improve as a result of this feedback? I don’t believe so. The process can be disturbing to the employee and barely actionable for changing his or her behavior.

Good managers have realized that they need to give continual feedback during the course of the year. With fast feedback cycles the employee can work to refine her performance to make it better and better - or more exactly, to come closer and closer to what the manager wants (I'll resist the temptation to go off on the interesting tangent here of whether or not “better” is the same as "more like what the manager wants.”)

Using continuous feedback, a manager can encourage the employee to experiment, to take chances and get out of his comfort zone because he will hear quickly whether a change is working or not. It also helps employees deal with change - and agility teaches us nothing if not that responding to change is critical for sustaining a business.

Continuous Employee Feedback Benefits

The advantages of rapid or continual feedback to employees are similar to the benefits we gain through agile and lean software development:

• Both mitigate risk through constant adjustment.
• Both allow for change in situations where change is constant.
• Both allow for experimentation and risk-taking.
• In both cases, we judge success by successful outcomes, rather than by adherence to a pre-defined set requirements (in the case of software development) or performance objectives (in the HR management case).
• Both are empowering to employees, (“you go ahead and innovate, and I will make sure you don’t get too far off track - we’ll succeed together.”)

Perhaps most importantly, rapid feedback to employees allows the manager to remove impediments, actively contributing to the employee’s (and the team’s) success. It is a success strategy, not a “gotcha” strategy.

A fast-feedback and adjustment approach to budget execution can allow the company to seize opportunities that require spending, avoid the feeling of “entitlement” and the tendency to “protect” budgets, and the dysfunction we’ve all seen of spending wildly at the end of the year to be sure and exhaust a budget. Similarly, fast feedback can help keep projects on track and avoid pouring money into ineffective investments.

Agile fast feedback is a powerful principle, and a general one.