What’s Wrong with Annual Reviews – and 6 Tips to Improve Them

Annual reviews are far more dreaded than revered. Yet, despite the bad rap, companies continue to schedule performance reviews once a year.

Nearly a third of companies still do them, and another 18% check in biannually, according to research from Workhuman.

Why the Distaste for Annual Reviews?

Employees worry that sitting down once a year isn’t enough. Specifically, Workhuman found employees are concerned that:

• Their review won’t accurately reflect their performance (22%)
• They won’t receive a bonus/raise (19%), and
• They had fewer opportunities to grow, and that will be reflected (12%).

Anecdotally, why are annual reviews almost universally disliked?

• Employees usually dread the conversations, wondering how they’ve measured up
• Managers often stress over the additional pre- and post-meeting work, plus the discomfort associated with sometimes having to tell employees things they don’t want to hear, and
• HR has to keep it all in check, adding more chaos to your year-end.

“Annual reviews are not a bad idea, but they must be part of something larger and never stand alone as an indicator of performance,” says Rosette Cataldo, Vice President of Performance and Talent Strategy at Workhuman. “Many employees have grown weary with the traditional once-a-year appraisals and its clunky processes, and managers can become overwhelmed with the sheer amount of work it takes to look back and recall all that the employee contributed or fell short of delivering over the year.”

Every organization is different, and the pace, complexity and process for performance reviews will need to vary. Some strategies work across the board to help employees perform well and stay engaged, and to help leaders and companies manage performance to optimize business.

Here are six strategies for more effective performance evaluations.

1. Ditch Annual Reviews

Experts, practitioners and researchers agree that employers should ditch annual performance reviews for varying reasons.

Perhaps this is the best reason: Just 2% of HR executives at Fortune 500 companies strongly agree that their performance management system inspires their employees to improve, a Gallup study found. If the best-in-class companies are struggling to get reviews right, what could be going on elsewhere?

This isn’t to say you should ditch reviews entirely. Instead, most experts agree, you want to increase the regularity of reviews – quarterly or monthly. And train managers to approach them more informally so the constant review of what’s going well and what needs to be tweaked is comfortable for both sides.

From there, you can add these other effective strategies.

2. Start with Online Assessment

More companies today start the regular cadence of reviews with brief self-assessments. It’s particularly effective with more informal, frequent reviews.

For instance, Treva Fairman, Chief Operating Officer at Ascend Behavior Partners, told the Wall Street Journal that her organization adopted an online assessment that takes managers just about 10 minutes to complete, followed by brief one-on-one chats with front-line employees who traditionally didn’t get much feedback. It’s helped them evaluate employees on performance and their commitment to company values.

Whether you use a performance management software tool or rely on an in-house manual process, you can create a three-question assessment to make the actual conversation effective. Touch on:

• What’s gone well since the last discussion
• Where there have been struggles, and
• The support the employee needs going forward.

3. Put Weight on Company Culture

Company culture matters – and employees want credit for their contributions to it. In fact, a greater number of employers today emphasize contributions to company culture in self-assessments.

“Employees are investing more of their whole selves into the workplace. A culture that fosters positivity through recognition, continuous feedback and the sharing of goals for the purpose of receiving supported growth recreates an environment where employees have a greater sense of belonging, purpose, achievement, happiness and enthusiasm,” says Cataldo from Workhuman.

While it might be more difficult to quantify employees’ impact on company culture, your managers can almost always see if employees lift up or bring down others. Make that part of the assessment, having managers and employees identify behaviors that add to or detract from culture.

4. Vary How You Assess Skills, Contributions

Annual, bi-annual, quarterly, monthly – whatever frequency you choose – is predictable and usually relies on the same person or people to review the same performance.

To broaden the view of performance, try a different approach to cadence, people and what’s measured.

“Annual performance reviews have a place in an organization’s approach to evaluating an individual’s overall performance, but they often miss the full picture of an employee’s contributions,” says Joan Goodwin, Performance Management Practice at Deloitte Consulting.

Instead, she suggests “upon completion of a project or initiative, have the team members or managers who have been closest to an employee’s work complete 360-degree or multi-rater feedback that identifies the top two or three skills being demonstrated and then one area where they need development.”

You don’t have to take extra time for this, either. Managers can weave the skills conversation into check-ins to recognize strength and development areas in real time. Then they can identify training and exposure that employees might try to grow.

5. Be More Transparent

Pay transparency may be all the buzz, with many states enacting laws on the subject. But on a more personal scale, job and business transparency is critical to effective feedback.

While employees need – and want – to know how they measure up, they should also understand how leaders make decisions about promotions, assignments and pay.

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Then managers and employees can also work together on how to capitalize on their strengths or pursue resources for areas they want/need to improve.

6. Support Employees Post-Review

No matter how often you do performance reviews, what happens afterward is critical to success. Employees usually need some support to use the feedback and reach the next milestone.

What does it take to incentivize and support them? According to the Workhuman research, employees want, in order of preference: money, flexibility, positive work culture, job security and recognition.

Money still talks as the biggest incentive to perform well, and the researchers found companies act in kind, giving financial incentives in appreciation for great work.

Regardless of how you reward or incentivize employees, the most important part is that front-line managers know when their people are doing well or struggling so they act quickly and accordingly. And the best way for that to happen is through frequent check-ins and reviews.

“Many companies are now using continuous performance development to complement the annual review, enabling them to weave in a consistent stream of feedback, check-ins and priorities throughout the year,” says Cataldo. “This strategy is a win-win for both the employee and organization. Ultimately, by shifting performance review tactics, end-of-year conversations can be more meaningful to the employee and impactful to the organization.”