Why Jack Dorsey axed annual performance reviews – and what that means for you

Annual review season is here, but are performance reviews all they’re cracked up to be? More and more, leaders and workers alike are questioning the effectiveness of performance reviews, and whether they may be doing more harm than good. 

The topic is one that’s highly debated among organizations, making Jack Dorsey’s latest company strategy that much more shocking: He’s eliminating annual performance reviews and Performance Improvement Plans (PIP). 

Why is Dorsey making such a bold move to eliminate them completely – and should you consider following suit? Let’s dive in. 

Dorsey’s latest bold move

Jack Dorsey, formerly the head of Twitter, now the head of Block, is no stranger to controversial company strategies and policies. He’s made headlines in the past few years, from telling employees that they could work from home “forever” to nearly being ousted as CEO in 2020.

Now, he’s making another bold move for Block by eliminating annual reviews and PIPs. In a message to employees, reported by Insider, Dorsey said: “I want us to build a culture of excellence. …  If [excellence] not possible for any one person, we want to acknowledge that, and part ways without delay.”

“Our current ‘performance management’ practices do not help us achieve this. In fact, they are holding us back,” Dorsey continued. “Some have described them as a ‘denial of service attack on managers’ given the time commitment versus the benefit to our people.”

Instead of performance reviews, employee performance will be continuously evaluated with a rating of “exceeds, meets, or falls below” expectations. These ratings are visible to each employee at all times, to “help both the individual and manager have a conversation, and gives us more insight into how well the manager leads their people,” according to Dorsey. 

Along with this new rating system, Dorsey axed PIPs, asserting they don’t consistently work. “It’s a lazy and often surprising approach that we can avoid with direct and consistent feedback,” says Dorsey.

Are performance reviews on the outs? 

Performance reviews have long been a topic of discussion, with conflicting opinions about whether they’re truly effective or doing more harm than good.

“Ineffective performance management processes have a lot to do with employees failing to live up to their potential, or flat-out underachieving,” says Jamie Aitken, VP of HR transformation at performance enablement platform Betterworks. 

Research points to employees and managers alike being fed up with the current performance review system. According to a study from Adobe, 80% of workers want feedback in the moment, as opposed to aggregated feedback after a period of time. Additionally, over half of employees (55%) and managers (66%) wish the performance review process would change. 

And just getting rid of performance reviews with no feedback process in place isn’t the answer, either. Not getting feedback at all can be just as detrimental to employee performance and satisfaction and lead to feelings of resentment and disengagement. 

“Performance management should be a continuous, lightweight process, fueled by ongoing conversations and check-ins,” says Doug Dennerline, CEO of Betterworks. “Employees should always know how they are performing — and an annual performance review often isn’t enough — and be given the tools and resources to live up to expectations year-round.”

So no, performance reviews aren’t on the outs; Dorsey is still an outlier – at least for now. But his decision does mark a changing landscape. As employers try to keep up with what employees need to be engaged and successful, they may need to change the way they assess performance and provide feedback.

What HR can do

Whether you’re thinking of completely overhauling your current performance review system or just want to make sure it’s as effective as possible, here are some things to consider: 

• Give the right feedback at the right time: Too much or too little feedback can be a recipe for disaster. Instead, you want to find the sweet spot for feedback. That may mean providing “fast feedback” – which is casual, continuous feedback – or saving feedback for routine check-ins, such as during one-on-ones.
• Tailor the process to workforce needs: Getting feedback on the feedback process might seem redundant, but the more you understand what your specific workforce wants and needs, the better you can tailor your feedback process to keep employees satisfied and manage performance in a way that maximizes outcomes and improves engagement. 
• Train managers on the feedback process: Performance management isn’t just about the employee; it’s about the manager delivering feedback too. In his statement, Dorsey says that the new performance rating system “ensures we can have a fair two-way conversation [between employee and manager] holding each of us accountable to always raising the bar.” It’s important to make sure managers understand that feedback is not just a one-sided conversation, and that the way they deliver and approach feedback matters.