Annual Performance Reviews Are Going Away. Here’s Why

In the past few years, a growing trend has emerged in the Human Resources world.

Perhaps you’ve even experienced it in your organization. More and more, companies are doing away with the annual performance review.

For some, this movement is a welcome reprieve from the once-a-year drudgery of review time. After all, employees tend to hate the stress reviews cause, and managers bemoan the time they take.

There are, indeed, a lot of good reasons to abolish the annual review. But, if not executed properly, this trend can leave much to be desired.

Why Is It Happening?

The reasons for this shift are plentiful, but here are some of the top factors:

• The annual performance review, by its very nature, forces managers to consolidate a year’s worth of feedback into a single conversation. However, managers often focus on more recent activities because those are top of mind.
• Annual reviews can inspire managers to postpone in-the-moment feedback, causing employees to feel ambushed when they receive the feedback at a later point.
• Annual reviews can inspire employees to withhold their input regarding challenges or necessary changes and improvements until the review meeting.
• The review process can be seen as “unfair” as different managers use different undefined standards for interpreting rankings. Since they are often used as justifications for advancement and pay increases, this can cause serious discrepancies and morale issues.
• The review process is costly and time consuming for the organization, and yet, it is often not deemed as especially fruitful by either the manager or the employee.

While this is not an exhaustive list, it offers a good overview of the key concerns.

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Also read: How to Handle an Unfair Performance Review

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What’s the Alternative?

Companies like Deloitte, Adobe, Accenture, and GE have recently shifted away from the annual performance review and they’ve all reported very positive results. In general, they cite improved employee morale, productivity, and innovation, as well as reduced voluntary turnover.

However, it’s important to note that these organizations all had very strategic approaches. They did not simply abolish the annual review. They also instituted new processes for more frequent employee/manager conversations—referred to as check-ins, touchpoints, or one-on-ones rather than reviews. These may happen on a weekly or monthly basis, or based on the employee’s needs.

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Also read: Why -and How- You Should Be Developing Your Employees

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In order for organizations to be successful with this model, they must follow the lead of these pioneers. Without a clear strategy in place, removing the annual review can create a feedback vacuum. There must be some kind of structured feedback process in its place, and managers and employees must adhere to it.

Changing the name from “review” to something else can help make these conversations more informal and less stressful for everyone involved. Employee coaching and development can happen on an ongoing basis, and managers can provide more timely critiques and praise.

These positive results only happen with a true commitment to the new process. In practice, more frequent feedback means a greater investment of time for both the employee and the manager. However, the return on that investment—as proven by the companies who have already ventured into this territory—can far outweigh the returns gained from annual performance reviews.