The Annual Performance Review
The traditional annual performance review has faced criticism in recent years, and many organisations are re-evaluating or modifying their approach to performance management. While it may not be accurate to declare it completely "dead," there is a significant shift towards more frequent and ongoing feedback and development conversations.
What are your thoughts? From what I can see many companies are continuing to have an annual review cycle.
So what is wrong with it?
The Cadence - Having one review at the end of the year arguably simply isn’t enough. To really drive high performance there needs to be regular performance conversations. With the annual performance reviews many managers will set the objectives at the start of the year and then have a mini panic at the end of the year when they are expected to complete a review, knowing full well they haven’t discussed them throughout the year.
Lack of Timeliness - Annual performance reviews could potentially be providing feedback on performance that actually happened quite some time ago, making it challenging for employees to connect their actions with the feedback received. Timely feedback is crucial for employees to understand their strengths, areas for improvement, and make necessary adjustments.
It’s time-consuming - Particularly if you have a big team. There is certainly an administrative burden aspect to it for managers, employees and HR. In some cases the forms, the paperwork and the process seem to take over and the importance of the conversation is lost. I’ve lost count how many times I’ve told managers that I’m less concerned about the form, I just want them to speak to their people.
People don’t really buy into the process - It’s more than likely seen as a tick box exercise, as opposed to a process that really adds value if you’re having the right conversations. There shouldn’t just be one review at the end of the year, there should be ongoing conversations throughout the year.
What is important when it comes to driving performance?
Being clear on the goals / outputs - Do you know what success looks like? Has it been articulated? What will be different if you achieve your goals? It’s hard to work towards something if you don’t know what the goal is. In an attempt to ensure managers are having regular performance conversations I think businesses are now asking managers to set shorter term goals. To break it down into quarters for example and talk about performance every 3 months.
Being clear on the measurement - Employees like and need to know they’re doing well and their performance is on track, so when setting the goals you need to talk about how they will be measured. There are a number of ways to measure performance:
Monthly stats like sales performance, website traffic
Quality Standards - reviewing the number of customer complaints, errors in work etc.
Financial measures such as revenue growth, profit margins, return on investment (ROI), or cost efficiency
Time based metrics including things like response time, average handling time, or project completion time.
Performance can be evaluated by gathering customer feedback through surveys, reviews, or ratings. This provides insights into customer satisfaction, loyalty, and the overall customer experience
Performance Reviews - Performance should be reviewed on an ongoing basis. It can be up to the manager and employee how often that should be. You may decide to do it monthly because that’s when the sales results come through, or it may be quarterly because you want to give them a bit more time. The purpose of the review is to ask, what have you achieved?
Support and Training - Focus on performance enablement. Rather than just evaluating past performance, there is a growing focus on ensuring employees have the necessary resources, support and development opportunities to succeed in their roles. Once they have received the training, the tough bit comes when they need to implement it themselves. This is when you need to make sure they are getting the support they need from the manager and that they are available to answer any questions they may have.
Recognition and Rewards: It is so important to have mechanisms in place to recognise and reward employees for their achievements and exceptional performance. This can include verbal praise, monetary incentives, promotions, or additional benefits. Celebrate milestones and create a positive work culture that values and appreciates employees' contributions. If you don’t have this in place employees will leave to look for it elsewhere. People need to know why they are getting out of bed and know that they are not wasting time, they are really adding value.
Many organisations are adopting alternative approaches, such as regular check-ins, continuous feedback loops, agile goal setting, peer feedback, and 360-degree feedback processes. These methods aim to foster ongoing dialogue, enable growth, and align employee development with organisational goals. These new approaches are prevalent in smaller and start up companies that haven’t introduced traditional performance methods because of their size.
It's important to note that the complete elimination of annual performance reviews may not be suitable for all organisations. Some industries or roles may still require a formal evaluation process, compliance needs, or a combination of different evaluation methods.
The key is to adapt performance management practices to align with the organisation's culture, values, and goals, while prioritising continuous feedback, development, and engagement throughout the year.