In my two previous blog postings, I wrote about performance reviews from employee's and manager's standpoint. Here's what I think overall (will be glad to hear from you too).
Feedback is important for human beings and it is one of the most important means of development. I agree that performance reviews are not the most effective way of obtaining feedback especially in Agile environment where there are a built-in mechanism for feedback, which is a retrospective. Effective retrospectives enforce Agile values and come from your peers. However, I still support all types of reviews in a corporate environment because it contributes to the atmosphere of transparency and continuous inspection and adaption, which are important Agile values.
There are several drawbacks but they can be mitigated:
1. People do not like to be judged. - Be non-judgmental in your feedback and prepare to take feedback from others constructively and continuously. It feels good once you get into the habit.
2. People are sensitive to feedback. - It is important to create tolerance for risk. If people are comfortable to try, make mistakes, and try again, they need feedback to succeed. Once this understanding becomes your organizational culture, feedback is welcomed rather than causes frustration from the recipient.
3. People get feedback but don't act on it. - Help your colleagues define professional goals that work for them and create such an environment where they will have an opportunity to share their success with others.
So my solution to ineffective performance reviews is: decouple performance appraisals from career development and more importantly, from compensation evaluation. Establish continuous feedback flow and a consistent and fair compensation system which does not depend on annual review. Whether it is google's promotion system or Valve's "select a peer" system, do not base it on performance reviews.
How does it work in Agile? This year, I added management responsibilities to my Agile coach role. This made me think of how we can utilize annual performance process effectively to grow our scrum masters. As a result, I decided to use goal setting process in such a way that scrum masters think about supporting company's business objectives and establish common goals for all the 12 scrum masters and their teams. We did brainstorming jointly (of course, we used stickies, silent grouping, and voting) and came up with 3 high-level goals: improve accuracy of planning, increase reliability of commit (there were KPIs associated with this to make this goal measurable, differing between teams), building self-organizing teams (this translated into different specific goals for each scrum master), and maturing product backlog quality. Each scrum master has a set of specific measurable (S.M.A.R.T.) goals associated with one of those, and will seek continuous feedback from the team, adjust accordingly, inspect and adapt.
How does it all translate to performance appraisals? First, those should not happen once a year, there should be continuous feedback, and all parties should be open to it. Second, it does not have to come from your manager, I think it is important to welcome any feedback you can get and not feel hurt or upset, kind of grow thick skin and take any feedback constructively. Third, think of it as of a way to help you become better, or help your peers become better, not as an input for your salary increase.
To sum it up, I agree with Mary Poppendieck that it is important to create an environment where you have a coach, presented with a challenge (Mihaly Csikszentmihalyi's flow), provide and are open to feedback, and foster dedication. How you do it is up to you, but if you find an effective way to incorporate performance reviews in this process, go ahead. Just remember not to be judgmental, rather, use it as a feedback mechanism and as an input to creating goals for your colleagues that will help them become better professionals, better leaders, and better team contributors.