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Tech Company SAP Eliminates Annual Performance Reviews

SAP will still offer software to help other companies manage reviews

A man and woman talking at a desk in an office.

SAP, which sells software that supports how and when businesses deliver performance feedback to millions of employees worldwide, is eliminating annual performance reviews for its own workers.

The company touts its SAP SuccessFactors product as "the leading cloud-based human capital management software"; it has more than 4,450 customers and 40 million cloud application subscribers across more than 60 industries in more than 177 countries.

Based in Germany, SAP joins a host of other organizations that in recent years have either eliminated or replaced annual performance reviews.

SAP's head of HR, Wolfgang Fassnacht, told Reuters that Europe's biggest software maker found the annual review process counter-productive to meaningful dialogue.

"Grading workers did not work. People are open to feedback, also to harsh criticism, until the moment you start giving scores. Then the shutters go down," he told Reuters.

In announcing the change for workers in the United States, SAP said it will replace the slower, more costly annual process with regular check-in discussions to better support employees accustomed to working in a fast-paced digital environment where decisions and feedback happen in real time. 

With 4,000 employees in California's San Francisco Bay Area, SAP plans to implement the policy locally and across North America in 2017, according to a release.

The company is not alone.

As SHRM Online reported several months ago, Accenture, General Electric, Deloitte, Adobe, Medtronic, Gap and Microsoft have replaced performance reviews with other methodologies.

Reasons the companies cited for eliminating the evaluations were their laborious nature, the awkward dynamic they create between employees and managers, the unhealthy competition they incite among colleagues, and the dissatisfaction managers have with the entire process.

According to CEB (formerly the Corporate Executive Board) 6 percent of Fortune 500 companies have eliminated evaluations. The Harvard Business Review reported late last year that, by early 2015, about "30 large companies, representing over 1.5 million employees, were following a similar path."



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