Should you Ditch the Annual Review?

Over the past two years, companies have made so many changes — some even completely pivoting their products or services to meet this new pandemic world — that it seems almost ludicrous to suggest that you make yet another change. And yet here we are, proposing that you consider ditching the annual performance review process. However, bear with us, because we think that you’ll find that some of the alternatives to that tense, yearly meeting may save you time, money, and a whole lot of headaches. 

Now, during the pandemic, many companies put their annual review process on hold. Some companies did it simply because they weren’t set up to collect, analyze, and discuss the strengths and weaknesses in a Zoom meeting. Others, meanwhile, put a pin on them to give workers an opportunity to settle into their new or different roles — after all, it seems unfair to hold an employee navigating a totally new role to the same standards you would someone who knows the job like the back of their hand. And finally, several companies opted out simply because even if an employee was hitting it out of the park, their precarious financial situation meant that they couldn’t reward them with the standard raises, promotions, or bonuses. However, in cutting the formal sit down, employees missed out on valuable feedback, especially in a time when they may have felt insecure about their job or performance. 

While there is certainly value in providing an annual review, it is not without its flaws. For your employees, the annual review typically only reflects the work completed in the last few months — or weeks — of the year, meaning that if they’ve made slam dunks on other projects, beleaguered managers may fail to include them in their review. From an administrative perspective, the annual review is a real-time sponge — managers spend hours filling out a generic form that may not even appropriately capture the roles and responsibilities of the very people that they are reviewing. Moreover, the review forms then have to typically be discussed with higher-ups, the numbers may have to be run by accounting, and all of this just for the manager to sit down for 10 or so minutes?!?

Recognizing these pitfalls, many companies are experimenting with alternative review processes. Below, we outline just a few of the best examples from around the internet — read on to see if any may work better for you. 

Frequent Feedback: 
In lieu of one big, annual conversation, some companies are switching to more frequent, less formal check-ins with their staff. The idea here is that little conversations over time can add up to big results, with employees receiving more consistent, timely feedback on their performance. Employee engagement will rise significantly when workers are recognized for their contributions in real-time, but even delivering constructive criticism can pay off because workers can fix their foibles and correct course before it becomes a chronic problem. The issue here, of course, is distinguishing between informal “atta-boys” and more formal conversations, so the pros recommend that managers shoot to have a performance conversation quarterly to stay on top of providing timely feedback. 

Take it personally: 
As we touched on above, having your managers fill out a generic form can’t possibly capture the unique accomplishments and criticisms of your entire workforce. After all, an assembly line worker won’t have the same priorities — nor should they! — as one of your accountants! Luckily, personalizing the performance review process doesn’t have to be…well, a process! At General Electric (GE), for example, the company ditched its annual review process — which includes a rather cringe-worthy component that ranked employees against their peers — and now instead asks workers to list out their near-term goals and rate their performance towards these objectives accordingly. Managers can review the forms during touchpoint meetings and provide targeted feedback in the moment to help workers achieve their goals.

Be well rounded: 
One of the main problems with the traditional annual review system is that it is typically the opinion of one person — generally the individual’s manager — who may not actually be the best judge of performance. Instead, many companies are switching to a 360-degree review process, whereby workers are evaluated by their supervisors, their own direct reports, and sometimes other members of their team. In this way, employees can actually get a more focused evaluation of their strengths and weaknesses from the people who they are in contact with the most, but also feel valued in that their own feedback on the performance of others is being heard and put into action. 

Career climber: 
In reality, you’re only going to promote those workers that are consistently demonstrating success, so why not trade your annual review for a discussion on career development? By couching the conversation in what employees need to do to get to the next career milestones, you can make the “review” less of a critique and more of a conversation about their place in the company. In addition to reducing stress, the pros note that holding career discussions can help employees to identify which skills they need and give you the opportunity to connect them with such opportunities, which in turn breeds engagement and helps employees to feel valued. 

Don’t show me the money:
It may seem logical to couch discussions about compensation to performance, but the experts warn that the two subjects should be separate. When talk of money is on the agenda, employees will be waiting to hear the bottom line and will disregard much of the feedback and conversation before and after the dollar figure is disclosed. Similarly, if you are unable to give your employee a raise — or not the type of bump they were hoping for — they will likely walk away feeling discouraged, even if the compensation revision was tied more to company factors than their specific contribution.