Are Annual Performance Reviews So Last Century?

By Jeanette Coleman, SPHR & SHRM-SCP on Jan 02, 2020
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Annual employee performance reviews have had their day in the sun for decades. But it may be time for the sun to set on that tired, old workplace staple.

Employee performance reviews lack true value to companies because:

  • Nobody remembers details about what employees did well or poorly months ago. When performance reviews only happen once a year, work product from 10 or more months ago is a distant memory. So, reviews end up focusing on recent activity alone. Employees don’t get a broad view of what they could have been doing better throughout the year. The company hasn’t benefited, either, from improved work quality, behaviors and productivity employees could have been delivering for months if they had known what management wanted them to do differently.
  • Employees may feel blindsided. If there are details a manager does remember from months before, they likely involve a situation in which an employee made a major misstep – something that put a customer relationship at risk or required others to jump in and fix the problem, for example. But if the situation wasn’t addressed with the employee when it happened and the employee has performed well since then, the employee may have the sense that the gaffe has essentially been forgotten or that recent work has made up for it. Then, when it’s brought up in the annual review, the employee may feel sucker-punched, that the “old news” is still being held against him and that more recent, improved performance hasn’t been recognized.
  • They have limited value in developing employees. If an employee gets key feedback only through an annual review, it does little to enhance his or her career and personal growth. It also means that managers may be consistently annoyed by behaviors the employee doesn’t even recognize as detrimental or that the company is missing a chance to build loyalty by regularly expressing how much the employee’s contributions are appreciated.
  • They create stress. We all like and need feedback, but getting it only once a year puts a lot of pressure on that one meeting and on the people who prepare for and participate in it.

seven reasons up to date job descriptions are a must

What Should 21st-Century Reviews Look Like?

Consider sending annual performance reviews off into the sunset and instead beginning the practice of managers meeting with associates regularly throughout the year. Regular performance discussions:

  • Let managers and employees focus on what is and isn’t working well, address both small and large issues while they’re top of mine and create accountability. Ongoing conversations allow managers to easily check on progress toward change and express the company’s appreciation for the employee’s efforts.
  • Allow managers to get to know their employees as people. Understanding associates’ motivations, personal goals and areas of passion allows managers to help them see where they best fit within the organization, communicates the company’s desire to help employees be successful and ultimately helps the company retain high-quality people.
  • Are less intimidating than annual reviews are. Performance dialogues that happen regularly are far more comfortable and less fraught with anxiety. They dramatically reduce the potential for surprise. Done correctly, they can become natural, two-way conversations that build trust and align employees with company goals.

Annual reviews also have become synonymous with annual pay increases at many companies. While you may wish to continue providing employees with increased compensation each year, regular performance discussions allow you to tie a pay bump to specific performance goals. Rather than viewing an increase as an annual expectation, consistent conversations about performance will help employees understand how their work product is being evaluated and how their progress toward agreed-upon goals moves them toward increased pay.

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