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The Annual Performance Review: Antiquated or Necessary?

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As the holidays are in full motion, many business leaders are setting plans and strategies for the quickly approaching new year. The yearly performance review for your employees is likely one of the key items on the list. Most large corporations make managers do performance-based meetings with subordinates on a yearly basis to ensure goals are being met and to give merit-based raises. As many organizations are moving toward a more communicative and open working environment, I wonder if this traditional process is still relevant to the way the workforce is set up.

Here are my thoughts on the annual performance review and how we can improve on them.

Train managers on best practices

A lot of companies are doing away with performance reviews because they are often done poorly. Among employees who believe they have benefited from an annual review, by far the biggest reason was that their boss had the skills to do it right. If a poorly executed performance review is the driving factor for employee dissatisfaction, then why do we keep putting people in these situations without the proper training? By spending a small amount of time and money on creating a set procedure and implementing a training process for those in management positions, you can save yourself from major headaches down the line.

Switch up the timing

A big argument against performance reviews is the amount of time elapsed between touch points. Although an annual meeting is an easy way to keep track of performance looking back over the past year, research suggests that without frequent feedback throughout the review cycle and being given meaningful performance standards, employees are not likely motivated by the review meeting. I recommend scheduling several short conversations throughout the year—monthly or quarterly—instead of one long conversation that will mostly be forgotten.

Create discussion, not a lecture

The reason many employees dread annual check-ins is because it’s less a conversation, and more a lengthy speech from a manager’s soapbox. By creating more of a two-way discussion between manager and subordinate, it becomes a more holistic conversation about goals and strengths, not just about past performance. By moving toward an informal system with constant feedback, you can address issues in real time and take advantage of valuable teaching moments throughout the year.

Consider who makes up your workforce

Employees from different generations or cultures can vary greatly in their views on the frequency of feedback. One survey found that baby boomers prefer less frequent feedback, while millennials prefer more. Do you have a mixture of employees from different age groups? If so, find your sweet spot. Where monthly check-ins could work really well for one group, it could overwhelm another. Perhaps quarterly reviews could be a happy medium between yearly and monthly. You will need to have open conversations with your employees to figure out what will work best for your office.

Follow the leader

More than one-third of U.S. companies are abandoning the traditional review process. Not surprisingly, technology companies like Adobe, Dell and Microsoft are leading the way in this movement away from tradition. Business researcher Josh Bersin estimates that about 70 percent of multinational companies are moving toward this model, as well. This shows a major shift in workplace culture across the board, and if it’s working for well-known, successful companies like that, more are likely to follow.

If that’s not enough, ultimately you just need to figure out what works best for your employee base. The annual review hasn’t completely fallen off the radar just yet. Make sure your managers are equipped to perform the most effective reviews on a consistent basis, then your employee success and retention will surely follow. 

For thoughts on moderating your own effective performance reviews, check out our blog for more tips and let us know how they helped!

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