Very few people enjoy annual performance reviews.
But year after year, companies keep enforcing this process. A recent study by the SHRM found that over 72% of companies continue to mandate and conduct formal annual performance reviews.
Whether the reviewer or a reviewee, annual performance reviews are difficult for both parties.
For the reviewer, giving a performance review is a large responsibility. To do it properly requires a significant amount of planning and work. The reviewer must think back over a full year as they consider an employee’s actual performance. They need to have written document prepared with objective facts and observations. Then they are put in the uncomfortable position of providing some level of criticism, most of which will be ill received and have a different impact than what was intended.
Then there’s the person being reviewed. Their anxiety and tension levels are elevated, as they believe this review will have an impact on their career, advancement opportunities, and pay rate. They seek constructive criticism and ideas for improvement but fear negative criticism. Many people have rightfully stated that attempting to sum up an entire year in a two-hour discussion is pointless. Overall, most employees feel an annual performance review is yet another painful corporate process.
It’s no surprise that numerous studies have shown that annual reviews are ineffective and result in little—if any—performance improvements.
The ineffectiveness of annual performance reviews does not, however, negate the need for employee feedback. Most employees want feedback and to better understand how they are performing. They also want to know what they can do to improve their performance, how to advance their career, and how to increase their pay. There is also inherent value for employers in providing feedback and criticism. They want employees operating in the most efficient and productive manners. Employers also need opportunities to address both employee concerns and areas for development.
I have found there are two distinct problems with the annual performance review process. The first problem is that they are conducted annually. The second problem is that they are considered a review. In order to solve these problems, I suggest having performance discussions on a regular basis. Here is how I handle the process:
I meet at least monthly with those who report to me to address a number of topics. Some of these meetings are very formal, while some are more relaxed. We look at how their time is spent and if they are productive. We discuss challenges they are facing, allowing me to provide advice and feedback. If I believe they are headed in the wrong direction in certain areas, I bring it up for discussion. If they are not performing well in some aspects of the job, we chat openly about how to solve the problem. If they have direct reports, we talk about who is excelling and who is struggling, determining what we need to do to make sure everyone on their team succeeds.
We do still meet annually, but our regular meetings allow the annual meeting to be a session of planning and strategy. We consider what was not accomplished in the past year and analyze the reasoning. We then decide if those goals are still important based on what we seek to accomplish in the upcoming year. We set new goals and initiatives, evaluate resources, and develop opportunities for personal growth. Other than spending some time evaluating the past year goals, our annual meeting is a very forward-looking exercise. There is no anxiety, uncertainty, or criticism. We look forward to our yearly sessions as an exciting start to the year ahead.
It is time for the business world to phase out the traditional annual performance review process. We see significantly better results for employers and employees with a combination of frequent performance and strategy meetings and a goals-centered annual meeting that brings a positive outlook to the start of a new year.
Next week, we will look at how employees can manage the on-going performance discussion process and pave the way for career success.
Brian T. King is the founder and owner of multiple firms encompassing design, construction, real estate, and manufacturing, and currently president of the integrated Design-Build firm A M King. Brian shares his passion for mentoring young professionals, rising managers and entrepreneurs at speaking engagements around the country, on podcasts and via his blog.