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Why Annual Performance Reviews are Ineffective


Anyone who has worked in a corporate setting has probably also had experiences with the dreaded performance review. We’ve all been through them or had to facilitate them, but it’s difficult to find someone who actually finds them to be effective. According to the Society for Human Resource Management, 95% of employees are dissatisfied with their appraisal process. What’s more, 90% don’t believe the process provides accurate information.

So, why are annual performance reviews no longer impactful, and what can companies do to improve them?

Annual performance reviews date back to the 1950s, and for many companies, haven’t changed much since. As Brian Kropp, head of HR at CEB, a corporate research and advisory firm, states, “[Performance management systems] capture hours or things that come off an assembly line, and the world just doesn’t work that way anymore.”

In the old “industrial” method, management saw the employee as a replaceable “little production machine,” says Josh Bersin, principal and founder of Bersin by Deloitte. It was focused on production alone, rather than an employee’s personal growth. Annual reviews were simple and efficient for machine-age businesses; it allowed them to base employee success on their personal production capacity. However, employees were viewed as just unfeeling cogs in the industrial machine. Worse yet, a study by Adobe found that the historical method of conducting performance reviews have no effect on how employees do their job.

Today, employees seek greater focus on coaching and development. They want to feel empowered at work, with consistent and open communication whenever they feel it’s needed. Today’s employees want their supervisors to understand their skills, morale levels, and goals. Managers and employees who only meet one to two times per year miss the opportunity for this ongoing professional development.

Meeting frequently and informally can often have a more direct and quicker impact. Known as continuous performance management, this approach entails regular, more focused conversations between employees and their immediate manager. Rather than meeting with the head of the department just once a year, communicating biweekly or even monthly with a direct supervisor gives a more accurate depiction of an employee’s performance. Data is collected more frequently and in a more digestible form when done over a shorter period of time, which also means that it can be more detailed and accurate. Managers can better understand where an employee is excelling or where they might be encountering challenges.

Companies need to stop merely managing performance and start actually developing it. In fact, a report from UNC’s Kenan-Flager Business School found that today’s workers don’t see their managers as experts in certain subject areas, especially because all the information they think they need is readily available to them online. Instead, they look to their managers for coaching and mentorship. Meeting more frequently empowers managers to be coaches and leaders for professional development, rather than just a source of fact or the point person to compare employees.

As Laszlo Bock, former SVP of People Operations at Google, wrote in his novel, “Performance management as practiced by most organizations has become a rule-based, bureaucratic process, existing as an end in itself rather than actually shaping performance. Employees hate it. Managers hate it. Even HR departments hate it.” It’s time to start rethinking your performance review. Shape it into an opportunity your employees look forward to and that benefits your business as a whole. Your people will thank you for it.

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