Why annual performance reviews are outdated?

Annual performance reviews are a vital tool to measure employees’ performance. But now, it is considered to be outdated and misleading. They only focus on what already happened in the past. Hence, they provide inaccurate results and are undeniably ineffective. 

This is where Continuous feedback becomes a constant companion of these organizations. It encourages a culture of honest and ongoing conversations between managers and employees. It also focuses on the growth and development of the employees. As it has always been overlooked during traditional performance management.

Take a look at the pointers below on why to ditch annual performance reviews. And what you should do instead?

Why annual performance review doesn’t work?

  • Recency bias: Annual performance reviews only considers recent behavior. It is because humans generally remember the past months’ performance subconsciously. Hence, making it an inefficient way to evaluate overall performance.

For example, if the employee didn’t perform well during the initial months. But, she did well in the past 2-3 months, the manager might remember that performance only. And the same in the vice versa situation as well. This will either make or break the performance review. 

Pro tip: Encouraging a continuous feedback model lets you evaluate your employees’ performance weekly/monthly. You can include this model with annual employee reviews as well. By documenting their performance every month and briefing the same annually.

  • Tied with salary: Annual performance reviews are usually done for salary hikes. This makes the whole process delicate and sensitive for both managers and employees. Although, a salary hike is depended on the manager’s evaluation. 

If the review is positive, employees feel motivated. And when it’s vice versa, they started feeling disengaged and arguing with their managers. Hence, constructive criticism is often avoided and not taken into consideration. This lowers their growth and development. 

Pro tip: Ensure that continuous feedback and one-on-one meetings are implemented properly at the organization. This will help in taking the feedback, whether positive or negative, in the right way. It doesn’t include the salary aspect. Hence, employees will look up at the feedback from the upskilling perspective.

  • One-sided conversation: Annual performance reviews only interrogates the past performance of the employees. It doesn’t reflect on the manager’s performance. It also doesn’t take up the issues that might be affecting employees indirectly. Hence, leaving no space for discussing future goals and growth.

Even when employees are allowed to give feedback to the managers, they don’t usually do it. Due to anxiety and judgment, they avoid bringing up this topic and highlighting any specific pointers. 

Pro tip: Go for one-on-one meetings to have two-way conversations with your employees. It will help in discussing their strengths and blind spots. As it will keep you aligned with their goals and performance. Such meetings will also let you know your performance as a manager too. Make sure you ask them insightful and thought-provoking questions for open discussion. 

  • Formal and structured: Traditional performance management reviews are known to be too much formal and structured. This freaks out employees in advance. And it also becomes difficult for managers to give tough criticisms at this point.

This results in flawed reviews. The environment is uncomfortable at that point resisting open dialogue between two parties. This clearly indicates that it is not a good tool if you want to focus on learning and development as well.

Pro tip: This is where one-on-one meetings come into the picture. Here you can have informal conversations regarding their growth and performance. You can conduct it monthly and exchange feedback. And at the year-end, you can go through it in detail and see how the performance has been improved. 

  • Not aligned with modern business practices: Nowadays, the workplace environment is fast and agile. Hence, employees need feedback and direction consistently to grow and perform well. 

Traditional reviews are conducted once a year. This doesn’t fit best with today’s feedback model. Moreover, it is one-sided communication that resists open and honest discussion.

Pro tip: There are many alternatives to traditional performance reviews. It includes one-on-one meetings, custom surveys, pulse surveys, 360-degree feedback, etc. It ensures that employees feel valued and heard at the organization. The feedback culture also considers that the employees are growing and upskilling continuously. 

In a nutshell

As every practice needs an upgrade, the same is with the performance review model too. The annual performance tool is now an obsolete concept. It needs to be aligned with modern business practices.

Continuous feedback is a proven concept that works well when implemented correctly. To read more about it, you can refer to the HuddleUp website