Chapter 9 – Case Study 2: SAP Eliminates Annual Performance Reviews
The annual performance review is a main feature of HR programs in most companies. Yet, a handful of companies such as
Accenture, Adobe, Medtronic, Gap and Microsoft are moving away from the traditional annual performance review and
pursuing other methods. SAP is a very successful global company headquartered in Germany. The company provides support
for cloud-based management software that enables thousands of clients to deliver performance feedback to millions of
employees. While SAP will continue to provide support for performance feedback for other companies, it has decided to
eliminate annual performance reviews for its own workers in the United States. SAP’s chief HR officer for Germany, Wolfgang
Fassnacht, told Reuters that. “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.” This change does not mean that SAP is abandoning all
performance feedback, just the annual reviews are slated to go away. The plan is to replace them with regular check-in
discussions to provide feedback in real time and foster dialogue that can lead to better performance.
Discussion Questions
1. Why do companies conduct annual performance reviews?
2. What are the challenges with conducting annual reviews?
3. What changes do you think would improve the annual review process?
4. What do you think of SAP’s plans? Will they be successful? Why or why not?