Why it may be time to ditch annual performance reviews

Even the highest-performing employees often feel a sense of dread and anxiety heading into an annual or biannual performance review. Receiving feedback can be stressful, and when a year’s (or half-year’s) worth of work is packed into a mere hour-long conversation, the stress is compounded. It can be especially nerve-wracking to think about all the things that are impacted by these one or two review meetings, from compensation to career mobility. 

In the age of the Great Resignation and the Great Reshuffle, a lot is riding on the quality of performance-review conversations for employers as well. Historic numbers of individuals have shown that they’re willing to leave a job if they feel undervalued. Meanwhile, companies are finding that it is much harder and more competitive to attract talent than ever before. Catered lunches or bring-your-pet-to-work days will no longer suffice. At the end of the day, people are any company’s greatest assets and continued investment in their growth and development is critical to long-term business success. Providing an ongoing mechanism for transparent, two-way conversations is critical to helping employees and their managers build a trusted, transparent relationship that ultimately leads to optimal performance and business impact. 

The bottom line is that the tradition of doing performance reviews only once or twice a year is broken, and it needs to change. For the sake of agility and pace of innovation, employees need to have more frequent touch points with their managers (and colleagues) to discuss what’s working and the areas for continued growth. As an employer, you have an opportunity to stand out, attract, and retain the best talent, if you’re willing to provide your people with these touch points throughout the year. 

The problem with annual reviews

The truth of the matter is that employees show up and perform every day. But when managers try to summarize a year’s worth of achievements into an hour-long conversation about performance, it gives employees, at best, the impression that this one moment in time is how they’re being measured for their work. At worst, it provides employees with feedback long after it’s actionable. What can possibly be gained from discussing how an employee could have done things differently on a project that was completed four, five, or six months ago?

It can be especially painful to learn that one’s compensation, bonus, and opportunities to take on bigger projects and stretch assignments have been hit by things that happened long ago. Think about this: If you’re led to believe that annual performance reviews are your only chance at upping your salary, would you dwell on the things that didn’t go well in the past year or only focus the review conversation on highlighting the positives? Managers aren’t mind readers. 

It’s not just employees who are apprehensive about annual or biannual performance reviews. They can become an administrative nightmare for managers who feel pressured to produce novel-length reviews about their employees. And the work only increases if the manager has multiple direct reports. 

When managers are compelled to capture everything about their employees in a single review, more often than not, unintended bias seeps in. For example, in order to provide a balanced review with both positive and “room for improvement” feedback, the manager may overemphasize things that their employees don’t do well. Or if a manager has dozens of reviews to work through by year’s end, they may give everyone similar feedback because it’s easier and faster. It’s no surprise that 75% of employees think that traditional performance reviews are inaccurate, and 70% believe that they’ve received unfair ratings in their reviews, according to a recent Gallup study. 

Speaking of ratings, many companies may opt for a ratings scale with their reviews in an attempt to circumvent bias and provide structure. But in most cases, it’s not the employees who benefit from being “graded” for their work. How is an employee supposed to feel when they receive a three out of five? Ratings may be a helpful tool for certain business functions to keep tabs on people and assign value to employees’ talents, but they don’t actually help employees improve their work.

So How Do We Fix It?

If the point of performance reviews is to provide clarity and improve employees’ performance, they should be built around a system that gives employees, including managers, the feedback they need to be successful in the moment. What’s more, they should empower employees to customize how they ask for feedback. Not all work is quantitative data. 

The starting point for updating any performance-review structure is to ask employees for their feedback on what’s working and what needs improvement. This can be done via engagement surveys, hosting focus groups, or other methods of soliciting feedback. Some good questions to ask include whether they’ve been properly trained on how to fill out the performance review and give feedback to their peers; are they clear about their evolving roles and responsibilities; how they can progress in their careers at the company; and whether they’re getting helpful, actionable feedback. 

Review conversations work best when they’re set up in a way that feels less daunting. One way to alleviate the “fear factor” is to change the cadence of how often discussions about performance happens. More frequent, informal conversations between managers and direct reports lead to more frequent opportunities to address what’s on the employee’s mind —both the good and the bad—and help them course correct based on real-time feedback. More regular check-ins also afford managers the opportunity to adjust how they’re working with their direct reports to best support their career growth. 

Companies are also well served by making it easier for their employees to give and receive peer feedback. Peer feedback can be immensely beneficial, as it allows employees to gain an understanding of how their own work is perceived by their colleagues. This helps them figure out how to best utilize their own skills and how they can collaborate with their peers to be productive as a team. Another benefit of peer feedback: the global nature of work today means it’s more common nowadays for an employee to work with someone on one project and then not work with them again for six months. By being able to give and receive peer feedback “in the moment,” employees can pull in input from various sources and show their managers the progress of their work and how they show up. 

Conclusion

At the end of the day, your employees should know how they’re doing. Their manager should know where their direct reports want to go with their careers and how to best support them. If your performance reviews are delivering on those goals in an empathetic way, there shouldn’t be anything inherently scary about the process. 

Performance reviews can be one of the strongest anchors for reinforcing company values. When done correctly, it should encourage learning, promote self-reflection, and empower a growth mindset.

And if you don’t get it right, your employees will find another company that does. 

Arden Madsen is director of talent management at Adobe.