If you ask most workers if annual performance reviews are necessary, generations of cubicle-dwelling corporate workers would respond with a resounding “no!” Annual performance reviews create anxiety, are often highly inaccurate, and rarely represent an employee’s body of work comprehensively.

Although some sort of evaluation process is essential to maintain a workforce that consistently meets goals and standards, no one really likes the current way of conducting these reviews. The current performance-review system is expensive in time and resources, it forces managers to rank employees arbitrarily, and it often prompts employees to feel degraded. How can we improve this situation?

An End to the Performance Review

Unfortunately, no wholesale corporate revolution has done away with annual performance reviews. Some very heavy hitters, including 6% of Fortune 500 companies, are moving away from annual reviews in favor of consistent and ongoing feedback. This change is designed to help employees make improvements at the moment, creating a year-long arc of feedback instead of delivering a lump of data at the end of the year. Additionally, ongoing reviews mitigate the stress of scrambling to complete and relay the annual review to all of your employees.

Benefits in Sight

Many companies recognize that the actual savings from doing away with annual performance reviews may not be as substantial as expected. However, this initial investment should bring a higher return. For many organizations, the benefits of eliminating the annual review process are worth the risk.

Increased and Ongoing Recognition

By creating opportunities for employees to succeed and to be recognized throughout the year, companies hope to incentivize increased performance, which prompts more revenue and leads to happier investors and managers across teams. Course corrections that are given in the moment are also beneficial. Proceeding for a long time without management input to correct suboptimal work practices can reinforce bad habits, which wastes company time and resources.

Customized Goals: Elimination of Forced Rankings

From a management perspective, the forced ranking of employees based on often subjective standards of performance puts them in an untenable position. Because these rankings are often used to determine salaries and other resources and benefits, workers are able to determine where they fall in the ranking, even if this information is not stated directly. While the original idea of a workforce good-naturedly pushing each other to achieve higher rankings is pleasant, it often works to de-incentivize workers who push hard all year, but who may not know they are off-target until the end of the year.

Millennials, who now account for the largest percent of the workforce, are historically not motivated by forced rankings. Instead, they respond more readily to a hands-on and customized review process. As a result, ongoing coaching and recognition programs are more ideal for the majority of your workforce.

Customized Development and Training with Skills Testing

By creating regular opportunities for management feedback, companies can also include more objective data in their assessment and reduce the effects of emotion, manager opinion, and bias even further. By implementing skills testing into part of a regular assessment process (e.g. at least quarterly), companies are able to gather objective performance and knowledge data to allow more accurate assessment of employees and to reduce the pressure on managers. These would supplement and enhance regular performance reviews and discussions, providing employees with solid data-driven feedback focused on performance, employee growth, and career path-making.

Instead of forcing managers into a position that puts stress on their working relationships, using skills tests will provide a standard means of assessing workers. At the same time, skills assessments offer a fair and unbiased comparison of employee development, which eliminates the intense competitive pressure many feels in the current system.

Is your company eliminating the annual review? How has this changed the way you coach, engage, and retain your workforce?

Jessica Miller-Merrell

Jessica Miller-Merrell, SPHR, is an author, speaker, Human Resources professional, and workplace social media expert who has a passion for recruiting, training, and all things social media. She is the president and CEO of Xceptional HR, and a leader in the HR community with more than 12 years of industry experience. The author of Tweet This! Twitter for Business, Jessica was named by HR Examiner as the second most influential recruiter on the Internet and the seventh most powerful woman on Twitter. She is a columnist for both SmartBrief and The Huffington Post, in addition to Blogging4Jobs and Human Resources One on One. Jessica has been interviewed for professional articles in CIO Magazine, Entrepreneur Magazine, SHRM’s HR Magazine, and on CBS. Jessica earned a Senior Professional in Human Resources designation in 2008, and holds a bachelor’s degree in Anthropology and Business from Kansas State University. Originally from a small town in Kansas, Jessica currently lives near Oklahoma City with her husband, Greg and daughter, Ryleigh.

3 Comments

  • Avatar Erin Q. says:

    HR hates it and employees hate it, and for good reasons. Managers of big teams will often forget what their employees have been doing two weeks ago, so how can they present a real and fair performance review? The ideas presented in the article are valid and maybe soon they will become practices. 

  • Avatar Leslie says:

    Annual performance reviews should be about general numbers of a business, not income-producing activity or to judge them upon such reviews. Everyone hates them and they should be removed or adapted to provide real data that would benefit employees and employers. 

  • Avatar Addison B says:

    Employees have changed and so should the ways to evaluate them. A hands-on approach customized to meet their needs will only improve the quality of their work. Using rewards instead of yearly rankings is much better. 

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