Annual Performance Reviews Don't Work - Here's Why 

Your Annual Performance Reviews Aren’t Working

For the last few years, the problems of performance appraisals have been a hot topic. Progressive HR leaders have come to the realization that annual performance reviews aren’t working. Instead, these leaders know that they need continuous, real-time feedback and solutions. One writer in Harvard Business Review painted this bleak picture of annual reviews, citing managers who had referred to the review process as, “An investment of 1.8 million hours across the firm that didn’t fit our business needs anymore.” They referred to annual reviews as “a ‘rite of corporate kabuki’ that restricts creativity, generates mountains of paperwork, and serves no real purpose.” 

 

Indeed, HR professionals, executives, managers, and employees understand the problems of performance appraisals, even describing annual reviews as a dated system that discourages collaboration and innovation. Employers are also finally acknowledging that both supervisors and subordinates despise the appraisal process—a perennial problem that feels more urgent now that the labor market is picking up and concerns about retention have returned.

 

The list is long as to why annual performance reviews don’t work, but at the top are reasons such as; they cause tension and anxiety, are often based on subjective measurements and don't provide necessary recognition for a job well-done or feedback for improvement. From the organizational view, the performance appraisal process can negatively impact employee productivity, decrease job and culture satisfaction, and even cause employee churn. That’s why many HR leaders are actively addressing performance appraisal problems and looking for solutions.

 

Why do performance appraisals fail?

Annual reviews aren’t hitting the mark with employees or employers:

  • 1 in 5 employees is confident their manager will provide regular, constructive feedback

  • 90% of HR leads believe reviews yield inaccurate information 

  • 88% of managers believe time invested in reviews is not valuable

  • 58% of executives say reviews don’t drive success

*Source: 

The data suggests that everyone within the organization has some level of dissatisfaction with the annual performance review. Let’s explore where these negative perceptions come from. 

 

Lack of confidence in constructive feedback

Employees indicate that they lack confidence that their manager will provide regular, constructive feedback. When you consider the traditional annual review format, a manager completes a form based on the past 365 days of a performance. In that situation, it’s highly unlikely that an employee will be able to put feedback to use—most projects have been completed at the time of the review, and they’ve moved on to new goals and projects. 

The Society for Human Resource Management (SHRM) cites common employee complaints in an article that highlights why many employers are ditching the annual review process. According to SHRM, in addition to feeling that an annual process isn’t timely, employees also complain that reviews don’t reward high performers, nor do they deal with poor performers. 

Sadly, while the goal for a performance review is ostensibly to improve performance, all signs seem to indicate that it impedes performance and creates dissatisfaction for all who are involved.

 

Appraisals aren’t accurate nor are they based on data

Just as employees question the validity of feedback, according to the data published by Instructure, HR doesn’t believe that reviews yield accurate information. That may be due to the fact that the formality of the process makes the feedback one-sided. The formal review  process is all about a manager telling an employee how their performance did or did not meet expectations. There’s generally not much room for the employee to express their thoughts or provide feedback to their manager. 

In addition, the review is typically linked to salary increases, which can impede honesty. A manager may not have the budget to provide an increase that meets performance, and an employee may hold back from sharing their thoughts for fear of missing out on a salary increase. 

HR professionals and managers alike understand that the review can become a routine check-the-box event rather than a valuable conversation that provides accurate performance information. With this dismal outlook and many pressing priorities, managers are forced to ask whether or not these reviews are worth the investment of their time. The broken process also indicates why conducting a performance appraisal is so difficult for managers.

Finally, executives want performance review data that will help them understand how the organization is or isn’t driving for success. Traditional models typically don’t use hard data, relying more on 360-feedback or hallway conversations that managers use to gauge an employee’s performance. Again, this leads to questions around the validity of the data and the ability to use it to measure results.

 

Ways to improve the annual performance review process

The first step in improving the annual review process is to either remove it or add to it so that performance conversations happen more frequently. Most top managers recommend having weekly 1:1 discussions with direct reports. 

 

These frequent meetings allow for real-time delivery of focused feedback that can encourage an employee by recognizing what they’ve done well. Or, managers can highlight some areas of opportunity where they need to change behaviors. Rather than waiting 365 days to recognize an employee’s outstanding efforts or to bring up problems, a 1:1 discussion provides an easy way to communicate and provide timely feedback workers crave.

 

All employees value knowing how they’re doing, but in particular, the Millennial members of your workforce are “used to receiving instantaneous feedback from parents, teachers, and coaches. They've grown accustomed to having the immediate ability to ask questions, share opinions, and provide commentary,” according to Gallup

Unfortunately, according to Gallup, only 19% of millennials say they receive regular feedback, and only 17% of them say that feedback is meaningful.

 

Use technology to manage your performance review process

With indications that there is a lack of confidence, inaccurate data, and meaningless feedback in performance appraisals, organizations are left wondering how to overcome performance appraisal problems and errors that lead to these abysmal responses and results.

 

Thankfully, SyncHR has the technology available that supports a new, better model for performance discussions and reviews. The right tool, such as SyncHR's performance management tool, will help organizations support peer-to-peer and manager-to-employee discussions. Managers can use a 9-box format to holistically review their employees based on the behaviors and results that matter. 

 

The 1:1 tool allows both employees and managers to submit and create agenda items for their next 1:1 discussion, and use that discussion to create easy-to-track tasks, achievements and goals. Rather than an outdated discussion, a 1:1 conversation becomes a time for managers to manage goals, as well as reinforce skills, recognize accomplishments, and even provide coaching around career development. 

 

The goal of performance discussions should be to empower employees and managers. To ensure meaningful performance conversations take place, organizations need tools that provide ongoing support and a framework for development conversations, not a check-the-box annual experience.

 

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