Here’s What Happens When You Kill the Performance Appraisal

As human resources professionals, we’ve seen plenty of articles about how we need to ditch the performance appraisal. Today, I want to share with you the story of a company that’s done just that.

Texas Roadhouse (aka Roadhouse) is a full-service, casual dining restaurant chain. They operate over 400 restaurants in 48 states and 3 countries. Their motto of “legendary food, legendary service” has led them to be recognized as one of the Employee’s Choice Best Places to Work by Glassdoor and one of America’s 100 Most Trustworthy Companies by Forbes Magazine.

Mark Simpson is vice president of Legendary People at Texas Roadhouse. I met Mark at Ultimate Software’s 100th HR Workshop celebration here in South Florida. During his presentation, he shared with the audience a video that Roadhouse, in partnership with Coca-Cola, showed their management team a few years ago. Even though the video was produced in 2009, there are some very interesting and alarming statistics.

These predictions about the future workforce made Roadhouse realize they needed to change the way they managed performance. Mark said the senior leadership team had been trying to figure out for some time how to separate the performance appraisal process from merit increases. “When performance and pay are tied together, it creates an emotional conversation. We wanted to change the performance discussion to become more productive and constructive.”

Interestingly, Mark said he found the answer in an unsolicited email with a subject line about killing the performance appraisal. The email shared details from the book, “Get Rid of the Performance Review!” by Samuel A. Culbert, professor of management at UCLA. After reading the book, Mark decided to share it around the office and see what others thought.

Texas Roadhouse is a bottom-up driven organization. Their corporate offices aren’t called that – they’re called the support center because they “support” operations. When decisions are made, the question is asked, “What do our operators think and how will it affect them?” because according to Mark, “they are the center of our universe. They are the reason we’re profitable and successful.”

After getting a positive reaction to the idea of “killing” performance appraisals, a management team was formed to build and implement the new system. Managers were chosen because they understand both sides of the performance appraisal process. They give reviews and they get reviewed. Mark said it was this team that sold the new process to the President. “It became a project driven by our people, not an HR initiative.”

The new performance appraisal process is called GPS (growth, plan, support) and takes place 30 days before or after an employee’s anniversary date. Its purpose is to be forward-looking instead of backward. Managers already had regularly scheduled one-on-one meetings. That’s the time to talk about current performance. The new GPS process focused on the future:

GROWTH:   What career opportunities would you like in the future?

PLAN:           How do you prepare for those future opportunities?

SUPPORT:  What resources do you need to be successful?

Just in case you’re wondering, at Roadhouse, annual pay increases are based upon cost-of-living. Discretionary increases can happen at any time. Mark said that merit increases are based upon three factors: taking on additional responsibilities, exceptional performance, or promotions.

The performance appraisal has been entrenched in Corporate America for a very long time. I asked Mark to share how the change has impacted the organization. He said first and foremost it put career development in the hands of employees. “At Roadhouse, employees are in charge of the GPS conversation. They set up the meeting with their manager. They come prepared to talk. It’s a two-way discussion. Employees truly have a say in their professional careers.”

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During our conversation, Mark also mentioned that the company has low turnover and high employee engagement. Texas Roundhouse out performs their competitive set in sales. While Roadhouse cannot make a direct link between these outcomes and changing the performance appraisal, it’s clear that giving employees control over the process and transforming the manager role into more of a career coach has brought benefits.

The Texas Roadhouse story should remind us that change – even big changes – can be successfully implemented. It takes getting buy-in, having a plan, and listening to feedback.