Annual performance reviews have come under fire in recent years; the idea of setting time aside once a year to review an individual’s performance is coming to be viewed as an outdated, time consuming and ineffective way of managing and appraising performance. This stance has been galvanised further by the reports that big companies such as Adobe and Deloitte have scrapped annual performance reviews, in favour of real time feedback that occurs frequently throughout the year. Grand changes such as this have been heralded as huge departures from the standard approach to people management, but from a more critical standpoint, it raises the question: why aren’t companies doing this anyway?

Annual performance reviews have been a big part of business for decades, but they were surely never intended to be an isolated discussion that happens only once a year and is never referred to again? A year is a long time, and much will happen during that period; people will undertake a range of projects, some will leave, new people will start, and roles will change. If all of this is left for discussion at the predetermined ‘annual review’ time then that explains why many organisations are struggling to motivate, support and engage their staff. The observations of Adobe and Deloitte are 100% correct, people do need to be offered feedback in real time and they do need to know where they stand, but if this isn’t happening it doesn’t mean conducting annual reviews are the problem, it probably means all the processes in between are.

What happens in between?

It seems that where many organisations are falling down, is that rather than using the annual review to kick-start the year, and continually keeping up to date with how an individual is progressing, they use the annual review as the only time to check in with an employee. In reality this is probably not the case, the odds of an employee only ever getting any kind of feedback from their manager once a year seems rather unlikely. The issue is more likely to be that either these conversations aren’t linked back to the annual objectives (which should also be updated to reflect any changes), they aren’t viewed as formal feedback or they aren’t being managed particularly well. Any of these scenarios is going to cause uncertainty and anxiety for the employee and will consequently contribute to disengagement, lower motivation and decreased productivity.

However, it’s not just the feedback that occurs (or not) during the year that may contribute to anxiety and ambivalence, it can also be the culture and structure within an organisation. One of the key things that Adobe altered in their review revamp was to desist with the stacked rankings that were previously used. Stacked rankings are exactly what they sound like; people are ranked compared to one another and are usually offered rewards or incentives based on their standing. For some this form of internal competition may help drive them, but for most people, being in constant rivalry with peers, and always needing to push further for any chance of progression, is likely to be a fast track to stress and anxiety. It’s hardly surprising, therefore, that this element was leads to a variety of issues, including the loss of top talent to competitors. Pitting people against one another can be demotivating and does not encourage collaboration. Especially as most people in a business hold entirely different roles to their peers; how can you accurately compare two employees who do completely different things?  Most people want to be evaluated based on their own merits, not be compared to what their neighbour has done.

Getting it right

The way your company chooses to manage performance reviews should be based on the needs of your business and your staff. Taking the time to offer regular, good quality feedback should certainly be a top priority, but don’t be swayed by the reports of big companies doing away with annual reviews; if it is a process that suits your workplace then it’s no bad thing. Having a clearly defined opportunity to set out objectives for the coming year and to review the events of the previous one can still be incredibly helpful. In fact, if you review the processes that companies that ‘revolted’ against annual appraisal have implemented, they still often advocate a discussion at the beginning of the year about future objectives, to get the conversation started. Such an approach is still a form of annual review, it’s simply been modified to better reflect the needs of the employees and the business.

Annual reviews aren’t the enemy, but they do need to be part of a bigger plan, and deciding what that plan should be will require consultation with all of your staff, from director level right through to those working at the frontline.

The performance review process needs to be on-going, fluid and interactive. People are complicated and the views and opinions of one person can vary hugely from day to day (or minute to minute in some cases) and reviews ideally need to be tailored to each person; some may respond well to having defined objectives, while others may benefit from a less formal approach. Of course, if you’re in a business with 200,000 employees this isn’t so straightforward and having overarching procedures and frameworks to help guide managers and employees during the process is certainly beneficial. But no matter the approach you decide to take, the important thing to remember is that you’re dealing with people. You can’t rank people like you do your products and expect them to feel valued, and you can’t neglect the importance of regular feedback and support if you want them to progress, develop, and add value to your business. In any business, your people are your biggest asset, and making sure they know this is the only true route to success.

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