Is it time to get rid of annual performance reviews?

Employee performance reviews are an annual tradition in many companies, but I don’t know anyone who looks forward to it. Employees are often surprised and frustrated by the contents of their evaluation. Managers spend countless hours writing reviews only to experience the added stress of dealing with demotivated employees. Human Resources professionals struggle to keep the whole process moving forward while getting bombarded with complaints from managers and employees alike.

Why do we keep doing annual reviews if nobody’s happy?

I recently posed this question to a group of my human resources colleagues. The universal sentiment was that annual performance reviews could be extremely valuable if done right. Otherwise, they become a huge drain on time, resources, and employee motivation.

It turns out that “done right” is a very big IF. A 2010 study by Sibson Consulting, Inc. and World at Work revealed that 58% of human resources executives give their performance review process a “C” grade or worse. I doubt many executives would keep a manufacturing plant, a product line, or a company division that performed at a “C” level or worse year after year. How do performance reviews manage to stick around?

The promise is clearly there. Performance reviews can help determine who gets a raise and how much. They can help companies pinpoint opportunities for individual, team, or organizational development. The evaluation process can be used to help employees set goals for the coming year. Reviews can even provide solid evidence for handling performance problems.

To quote sports personality Jim Rome, "Give me an A or give me an F." My suggestion to organizations is to make a clear and unambiguous decision. Either commit to strengthening the annual review process so it achieves organizational, managerial, and employee objectives or scrap it all together.

Note: Toister Performance Solutions offers training and consulting services to help clients make the most of their employee evaluation process. Please drop us a line if you'd like to go for an A.