Annual Performance Reviews: Are They Worth It?

Annual Performance Reviews: Are They Worth It?

Annual performance reviews have been with us as long as we can remember. But are performance reviews actually improving performance?

Many companies are answering this question with a resounding, “No!” We’ll help you understand why.

Are annual performance reviews paying off?

annual performance reviewsAs both employees and supervisors, we’ve all rated ourselves, set goals, critiqued our bosses and peers, and been measured by our managers.

The performance review process takes a lot of time, usually causes anxiety, and sometimes creates disappointment or unhealthy competition. This is a lot of trouble to go through for an operation that many companies now realize reaps fewer rewards than expected.

When performance reviews don’t improve performance, it’s time to rethink what we’re doing!

Companies are eliminating annual performance reviews:

Many companies have ditched the annual performance review process in favor of providing ongoing feedback. They’ve eliminated the forced rankings and the check off boxes.

  • A poll this spring by Brandon Hall Group showed that about 16% of the companies surveyed had eliminated a rating scale.
  • Some very large companies, such as Accenture, have ditched the annual process entirely.
  • A recent study by CEB showed that 84% of companies surveyed said they are overhauling their performance appraisal system.

Timely feedback vs. annual feedback:

Employees benefit greatly from frequent and timely feedback. That’s just plain common sense, right?

When we’re headed in the wrong direction, we want someone to let us know before we go too far down the road. And when we’re doing something good, it’s hugely motivating to receive acknowledgement of our successes.

Imagine if we were to only get on our scale once a year to weigh ourselves! Correcting the damage of the previous 364 days would be a daunting task.

Employees want to contribute:

Workers truly want to know how they can best contribute to the ongoing success of the business.

Employers should ask themselves:

  • What are our upcoming projects, goals, and expectations?
  • How can our employees improve what they are doing now to achieve those things?

Employees know their success depends on the company’s success. Moreover, in my experience, employees also want to do a great job simply because that makes them feel good.

Regular input about performance is a gift to your workers and your business.

Performance reviews in a team environment:

Most of us work in a team environment, and feedback from our team members is critically important.

Direct supervisors may not personally know everything employees are doing, or how they’re performing on group projects. Encouraging workers to acknowledge one another’s contributions and achievements benefits everyone.

Kudos and suggestions from peers are incredibly valuable in terms of employee motivation, and can greatly improve the success of projects.

Problems with eliminating annual performance reviews:

A CEB study showed that while many employers are shifting away from traditional annual performance reviews, the removal of rankings or ratings creates some problems.

When conventional performance assessments were eliminated, performance levels became more ambiguous.

  • This made it harder to make performance based pay decisions.
  • Managers had a much harder time communicating justifications for the size of employees’ salary increases
  • Top performers became much less satisfied.

This last point in particular is understandable. Type As like to get the “A” — and the resulting pay increase that goes with it.

Performance reviews must continue evolving:

As new generations take over our workplaces, it makes sense to review how we measure, motivate, and reward performance.

People often get stuck in the rut of “this is how it’s always been done, so this is what we should keep doing.” Changes are happening on every level of the workplace and to every aspect of the workforce. We must remain flexible and open to adapting if we want to succeed.

That said, we don’t want to discard something that works, or change just for the sake of changing. Sometimes there’s good reasons for “this is how it’s always been done.”

Companies that develop the most valuable, successful performance assessments will be those that listen to their employees’ feedback.