It’s that time of year- yeah! The annual performance review season…when managers scramble to track, measure and discuss performance with employees, in an attempt to focused employees on key priorities and improve performance, attitude, commitment, trust and engagement, all in one hour.

Oh right, you also squeeze in a quick chat about this year’s “raise” as you wrap up the meeting [perhaps awkwardly].

I usually joke that performance reviews are “universally” hated, but this is close to the truth.

Employees and managers dread doing them and question the value of the traditional annual review process. Even the largest employers struggle with improving employee performance and engagement based on this time-consuming process. More than half admit there is limited alignment of “pay for performance” in their process.

“Performance management is often a source of great frustration for employees who do not clearly understand their goals or what is expected of them at work. For these employees, annual reviews and developmental conversations feel forced and superficial, and it is impossible for them to think about next year’s goals when they are not even sure what tomorrow will throw at them.”
(Source: State of the American Manager: Analytics and Advice for Leaders, Gallup 2015)

In fact, by 2015 12% of the Fortune 100 decided to eliminate them.

Since large employers are abandoning this very corporate practice, you may think you should do the same at your business.

The question to ask is: “was the new system any better at linking performance to rewards and enhancing a culture of engagement?”

Unfortunately, no.

A new study by advisory firm CEB found that measures of employee engagement and performance dropped by 10% when they stopped conducting annual reviews!

According to a Wharton article that summarizes this research paper, “Managers actually spent less time on conversations, and the quality of those conversations declined. Without a scoring system to motivate and give structure, performance management withered. As one manager told CEB: “When I gave someone a low score in the past, I felt responsible for helping them out, now I just don’t feel that I have to spend time doing that anymore.”

Wow, scary stuff! When managers don’t “have” to conduct annual review meetings, they actually might have less interaction with their team. Even the imperfect process is holding managers partly accountable to coach their team.

Here are several articles and books that explain the flaws with this universal practice, and some solutions that have been tried:

3 Books:

Tom Coens and Mary Jenkins, Abolishing Performance Appraisals: Why They Backfire and What To Do Instead

Garold Markle, Catalytic Coaching: The End of The Performance Review

Charles Jacobs, Management Rewired: Why Feedback Doesn’t Work and Other Supervisory Lessons from Brain Science

Now that you see the challenges with traditional performance review, read my article to learn about the “cutting edge” practices that are replacing it: “Replace Your Broken Annual Review with “Ongoing Performance Management”