Are performance reviews hurting your company's performance?

The annual employee evaluation that many business owners consider a pillar of best practices may in fact be an outdated process in need of an overhaul. As The New Yorker reports, study after study show that performance reviews can have a negative impact on employee-manager relationships. One study even found that individual appraisals were detrimental to employee performance in more than one out of three instances.

Last week, the consulting firm Accenture announced it was eliminating annual performance reviews, which CEO Pierre Nanterme said are "too costly" and don't achieve the goal of driving better performance. While companies including Microsoft and The Gap have recently reformed their evaluation processes, Samuel Culbert, a professor at UCLA's Anderson School of Management, told The New Yorker he doesn't think performance reviews work "in any form."

So how can entrepreneurs give employees feedback without negatively impacting performance? Here are three suggestions cited in the The New Yorker piece.

1. Conduct evaluations periodically--not yearly. Trying to assess a year's worth of work in a single evaluation will likely lead to important performance factors falling through the cracks. To address this problem, Accenture is replacing annual reviews of its more than 300,000 employees with more frequent feedback, giving managers a more comprehensive picture of a worker's performance. 

2. Focus on the future instead of the past. Managers who obsess over an employee's prior work can come across as antagonistic. To prevent putting a strain on your employee-manager relationship, focus on setting goals and objectives you want the individual to strive for in the future. 

3. Make performance reviews a call to action. One of main problems with annual performance appraisals is that good reviewers aren't rewarded for helping their employees and bad reviewers aren't punished for being antagonistic or biased. Instead of being useful, the process can become fraught with anxiety.

Accounting firm Deloitte shifted the emphasis of its reviews away from what bosses think of their workers to focus instead on what they would do to elevate certain staff members.

The company now has its managers use a five-point system to convey how much they agree with such statements as "This person is ready for a promotion today" and "I would always want him or her on my team."