Why Annual Performance Reviews are facing extinction

The hallmark of great corporate organisations is that their systems, processes, products and services, all evolve with changing times and are not cast in stone. 'Work from home', for example, is not a term that our parents could have even dreamed of. Similarly, when the iconic Newsweek magazine decided to shut down its print publication after 80 years in 2012 to go online, it sent a strong signal of the need to change with the times. Change is tough even in the best of times, but is also important to make sure it happens at the most appropriate time.

As far back as 2012, we felt at Adobe that annual performance reviews was a concept that had done its time. A decades' old approach to managing the performance of our most priceless assets - employees - was clearly out of sync with a generation that had grown up in the dynamic world of digital.

Our initial apprehensions were put to rest as the results of the move were a revelation - we saved more than 80,000 hours of productive time of our managers, and employee engagement and retention have been better than ever before!

So why did we embark upon this transformation? As mentioned in the previous paragraph, saving time was one of the prime reasons. Our internal research told us that the time being invested by our managers in the review process was not commensurate with the returns. In fact, if any, the returns were diminishing. We also found out that performance reviews created an invisible class bias and a spirit of one-upmanship amongst employees, which was hindering a collaborative work-environment and in turn, innovation.

Our leaders had also firmly come around to believe that the process of feedback had to be real-time and an ongoing process instead of a 'once-in-a-year' event. Today's employees demand to be engaged throughout the year. We, therefore, felt the need to formulate a process of setting goals, having regular conversations on where one stood on those goals, course correction if needed and goal achievement. This also helped in managers owning up a lot more for the performance of their teams; earlier 'a cumbersome end of the year process' was an easy excuse to hide behind.

The overarching motivation, however, remained the retention of our talent. At Adobe, we dedicate a lot of time, material and resources to get onboard the top talent. It used to really pain us to see that talent leave at any point. A quick analysis told us that attrition rates used to clearly spike right after the annual review process. This was the most damning indictment of the process that sealed the decision to abolish them.

It is heartening to see other corporations now attest a decision we took three years back. Many others will follow suit. You cannot, as they say, stop an idea whose time has come. Today our business has been growing and our stock prices have seen double-digit increases. A lot of it has been due to Adobe's business transformation. We are now a cloud-based subscription company. This successful transition has been made possible by our people collaborating and innovating at a fast pace. And we truly believe that one of the key pillars supporting this transition is our completely overhauled performance management system. In closing, I'd like to say that earlier we were focused on 'governance of performance review system', whereas now we are focused on 'enablement of performance'.