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Is it Time to Do Away With the Annual Performance Review?

In organizations all across the country, corporations, non-profits, and institutions of higher education are standing up against a 70 year old practice, the annual performance review. These organizations are realizing that while the annual performance review has provided useful information over the years, today’s employees want and deserve timely and frequent feedback.

Since the emergence of the annual review after the end of World War 2 there have been many critics of the process, and many universities have spent hours conducting research on the effects of the annual performance review. The results have not always been positive, and more recent studies by Texas A&M, Kansas State University, and Eastern Kentucky University have shown a negative impact on employees.  Here are four reasons why they find annual performance reviews to be lacking:

  • The Year Long Gap Makes Them Useless
    When it’s time to do an employee’s annual performance review, a full year has gone by since the last review. During this lengthy gap, managers have probably forgotten the material they were going to review with the employee. Let’s be honest, it’s hard to remember what someone did last month let alone six months ago. This makes any positive or constructive feedback given during the annual review obsolete. In order for feedback to spur action, it must be timely.
  • They Fall Victim to Biases.
    When conducting reviews only once per year it is easy for supervisors/managers to fall victim to biases. The four common biases are the recency, leniency, halo, and horn effects.

    When a manager uses the recency effect they only focus on an employee’s most recent performance. Managers stuck in this bias may be evaluating a poor performer in a positive light based on a few weeks of good performance or a positive outcome of one recent project.  The opposite can happen as well, a good performer getting a negative review based on a recent mistake.

    When using the leniency effect a manager may give everyone on their team a satisfactory review. Unfortunately, this occurs when a manager has a large group of employees to review in a short timeframe.  While the manager has good intentions, they get burned out and start giving everyone a satisfactory response.

    The halo and horn effects are two sides of one coin. When using the halo effect, an employee is rated highly in all areas because they perform well in one area of their job, but perform poorly in most other areas. On the flip side, when using the horn effect, an employee is rated poorly because they perform poorly in one area of their job, but meet or exceed expectations in most other areas.

  • Employees Feel Demotivated.
    During their research, the above mentioned schools found that annual reviews tend to focus primarily on negative feedback and that even the small amount of positive feedback given is not viewed in a positive light by the employees. Rather than motivating employees to improve, they found it had the opposite effect.  We all know that providing positive feedback is only motivating when it is done in a timely and accurate manner. Waiting eight months to tell an employee they did great on a project seems insincere.
  • It Focuses on the Past.
    When organizations only conduct annual performance reviews they are holding employees accountable for past performance at the expense of improving current performance. When focusing on the past, reviews don’t allow managers and employees to solve current performance problems and focus on developing skills for the future.  Waiting to do a performance review once a year causes organizations to miss out on having their employees work at their peak potential all year round.

If annual performance reviews are insufficient, then what should organizations being doing? Many organizations are moving towards more frequent, informal feedback processes.  One of the first to make the change was Adobe.  In 2012 the software company scrapped their formal annual performance review for what they call “check-ins”.

According to the Adobe blog post “Just Checking In”, their “new check-in culture revolves around clear expectations, frequent feedback – both positive and constructive – and no rating or rankings. No more late nights for managers scrambling to write detailed reviews for the record, and no more competitive motives underlying teammate interactions.”

A check-in should be conducted when projects finish, milestones are reached, challenges pop up, or at least on a monthly basis. It should be focused on recent performance; both what was done well and areas for improvement.  For check-ins to work, performance must be tied to expectations.  Employees should no longer be compared or ranked based on how they compare to their coworkers, but on how well they meet position expectations.

Some organizations who have implemented the check-in process still conduct annual reviews, but performance is not the main focus during the review. Instead, annual meetings, (more appropriate title than review) supervisors/manager sit down with employees to discuss their growth, development, goals, and engagement.

By moving to a process similar to Adobe’s check-ins, organizations are able to overcome the four reasons annual performance reviews are lacking. This new process:

  • Provides timely and frequent feedback
  • Focuses on the performance as it is happening
  • Helps managers react appropriately to poor or exceptional performance
  • Motivates staff to improve or maintain their performance year-round

Successful organizations can no longer rely on the most important conversations between managers and employees happening only once a year. In order to continue to grow our organizations, employees, and communities, feedback needs to be genuine, current, motivating, and timely.

Amanda Dokter

Amanda Dokter

PHR, SHRM-CP at Ketel Thorstenson, LLP
Originally from the southwest suburbs of Chicago, Amanda has spent the last 10 years working in human resources in both for-profit and not-for-profit industries.
Amanda Dokter

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