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3 Reasons to Bury Your Annual Performance Review Process

A couple of years ago I wrote a blog asking if annual performance reviews are dead, and now I believe the answer is most definitively “yes!”  My talk at the 53rd Annual Indiana Chamber HR Conference, “RIP Annual Performance Review” will go into much more depth on this topic and cover the inadequacies of current annual review practices, how to make changes to improve your current process, and tips to get to the best practice of ongoing performance feedback.

A few reasons why it’s time to let the annual review process go:

It’s Inefficient & Ineffective

Performance review forms are usually many pages long, take a long time to complete, and don’t often cut to the heart of specific issues that need to be addressed with an employee. According to a CEB survey, 66% of employees say that performance reviews interfere with their productivity and 65% say it isn’t even relevant to their jobs.

We also expect performance reviews to serve multiple functions: create goals, set pay, make improvements, provide feedback, and develop employees just to name a few.  How can we expect one process to do all these things well?  In short – we can’t.

Feedback Shouldn’t be an Event

In 2014, 72% of organizations held performance reviews on an annual basis, according to SHRM. But what we know about millennial needs (the fastest growing generation in our workforce) is that they strongly prefer regular, ongoing communication with their manager about their performance.  In fact, employees who met at least weekly with their managers were twice as likely to be engaged at work.

If we encourage feedback to occur organically between employees and supervisors after any performance event (good or bad, for either side) we’re likely to see positive returns in many forms – increased engagement, better ability to meet goals, more employee development, and longer retention.

Rating Employees Takes the Focus Away from Performance

Many annual reviews include rating or ranking of employee behavior, either on some sort of numerical scale (1 – 5) or descriptive rating (exceeds expectations, meets expectations, etc.).  An employee who sees his or her performance whittled down to a handful of ratings once per year can become disheartened and unfortunately, these kinds of rankings take the focus away from performance and instead force employees to focus only on the rating – “how can I look better” instead of “how can I be better.”

Annual reviews have been a part of business practices for decades, without much effective change or improvement.  It’s time to let this archaic process go, in favor of finding a process that better meets employees’ needs for ongoing, continuous performance feedback.

Catherine Schmidt
Catherine Schmidt
Catherine Schmidt, PHR, SHRM-CP, is Purple Ink’s Consulting Manager and has nearly a decade of experience managing various HR functions including recruiting, creating training programs, compliance, and performance development initiatives. She has worked in a variety of industries such as professional services, manufacturing, and non-profit settings. You can follow Catherine on Twitter @CatherineS_HR.

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