• Chiara Toselli

Are Annual Performance Reviews Dead?

Are annual reviews dead?


In 2015, The Society for Human Resource Management suspected annual reviews were on their last legs as many companies had stated that they had ditched annual reviews. Despite many newsworthy names such as Adobe and GE stating they stopped them, WorldatWork found that 91% of businesses still conducted annual evaluations.


The truth is that annual performance reviews never really died. They are still a staple in the performance management process, and in all likelihood, they will continue to be used for years to come.


That’s not necessarily a bad thing as long as certain aspects of the performance management process are revamped. In this article, we go over the aspects of the performance management process that should be revamped. We’ll also highlight how the right performance management software can make all the difference.

Are annual performance reviews dead?


Need to revamp: The frequency of performance check-ins

“Make feedback normal, not a performance review.” - Ed Bastita

For the newsworthy companies that stated they were ditching annual reviews, many of them simply supplemented the reviews with more frequent check-ins. Continuous feedback truly helps develop and motivate employees.


With continuous feedback, employees will know where they stand. Studies show that fewer than half of the employees know where they stand concerning their performance. How can companies expect employees to perform well if employees don’t know if they are doing a good job? Continuous feedback helps clarify goals & expectations.


Employee's perception of performance

Continuous feedback also allows the feedback to be timely. Once-a-year conversations will guarantee that the feedback will be vague and irrelevant once the employees hear about it. Ideally, the feedback should be in real-time so that employees can act on it ASAP.


Finally, continuous feedback can create a better relationship between manager and employees. The good working relationship between employees and their manager can often get overlooked, but it has a direct effect on engagement and employee productivity (in fact, managers account for as much as 70% of variance in employee engagement scores)!


If managers are checking in with their employees multiple times a year, then the annual reviews will simply be an aggregation of all the feedback/check-ins an employee should have received throughout the year. While the check-ins may be more informal, annual reviews can have a set of questions to guide the conversation in a more structured way.


Check out our article on our favorite performance review questions. 

How frequent should the performance check-ins be?


The frequency of performance check-ins will be different depending on the organization. For more operational/field employees, quarterly reviews may suffice. For corporate employees or for workforces that are composed of mostly Millennials and Gen Zers who want more feedback, bi-weekly continuous feedback may be preferred.



Need to revamp: Performance ratings


Performance ratings are tricky to get right. Most employees have an allergic reaction when rated 3/5. Moreover, the variance between managers can affect important talent decisions. For example, some managers may rate employees meeting expectations as a 5/5, whereas another manager may rate these employees a 3/5.


The variance between managers will influence compensation and promotion decisions. Employees that notice the review cycle being unfair will begin to feel unmotivated and frustrated quickly. Many employees would even consider quitting if their work isn’t being valued or recognized.


For performance ratings, ratings need to be clearly defined and communicated to employees. Moreover, calibrating performance ratings will improve consistency, fairness, and accountability.


You might find our pervious article “Performance ratings - Keep or Drop” insightful. 


Need to revamp: Feedback quality


Have you ever received the following feedback?

  • “Good job”

  • "Keep up the good work"

  • “Kudos"

  • "3/5"

Did you find it helpful? Let's be honest, the above feedback will not develop or motivate employees.

Performance reviews should be accompanied by sufficient quality of feedback. The feedback has to be action-based, effort-based, and forward-looking, and specific examples should also be used.


Check out these employee feedback examples.

We recommend having open-ended questions in your performance review (vs. restricted questions) as this will help encourage the manager to write down feedback (vs. just tick a box). We also recommend training your employees on what effective feedback looks like. This can help employees share more constructive feedback that actually improves performance.



How the right performance management software can help


Performance management solutions give employees a place to document all the feedback. It allows the employees to track progress, and it can save managers time. Many softwares are equipped with sending feedback reminders - these nudges can help increase the frequency of feedback conversations. For the HR department, performance management solutions can help streamline the entire process. Moreover, many softwares have people analytics, which allows leaders to make data-driven decisions about their talent.


When choosing a performance management software, understanding your people strategy and culture is important. For example, if your organization is a matrix/agile organization, a system that allows for 360-degree feedback may be a top priority. We recommend understanding the features are a must-have and which features are a nice-to-have before searching for vendors.


Lastly, we would highly recommend that the tool you pick is an intuitive solution to help maximize employee adoption. Nothing is worse than implementing a solution that only 30% of the organization uses. Most vendors have a pilot period - we highly recommend taking advantage of this trial period and putting the software to the test. (Is it intuitive? Is the provider responsive to questions? Does it integrate with other softwares? etc)


If you currently looking for a performance management solution, you may find our article on how to choose the right performance management software helpful. We also recommend checking out Pavestep. 

Conclusion

Annual performance reviews are not dead; but they are in need of a major revamp if they are the only means of assessing employee performance. Increasing the frequency of feedback conversations, ensuring that managers are properly trained and understand performance ratings, and ensuring that sufficient quality of feedback is given will help develop and motivate your workforce.


For information on how Pavestep could help, please feel free to reach out. hello@pavestep.com