Have you ever met a manager or an employee who looks forward to the annual review process? It's not likely. This SHRM study found that as many as 72% of companies still conduct yearly reviews even though 87% of both managers and employees find them ineffective. And, an Adobe study found that 41% of employees would go so far as to change jobs to avoid this grueling process. 

Why annual reviews are ineffective.

Have you ever been asked by a medical professional to rate your pain on a scale of zero to 10? It's nearly impossible to label it with an absolute number. "Oh, it's about a four-and-a-half," you might say. Or, "Somewhere between five and eight." 

Standard annual reviews ask managers to assign a numeric value to their employees' performance, which is impossible. Performance and value are subjective, depending on the circumstances at any given moment. Employees are humans, not numbers; no one wants to be graded and labeled.

Companies like Adobe, General Electric, and Cigna have ousted the annual review process in favor of frequent, individualized feedback. They have indicated a greater sense of inclusiveness and camaraderie, which are core to a thriving company culture.

This is how annual reviews usually play out. 

If you perform annual reviews for your employees, you probably approach it like most of my clients have done in the past. You begin pressuring yourself to get the review done about two weeks before the due date. You dread the process and wonder where you're going to find the time. As you're driving to work, you might think about the employee and try to remember their mistakes and achievements over the past 12 months. Lastly, you stay up all night to work on the review and deliver it to a very uncomfortable employee the next day. Frequently, months past the anniversary date. 

Is a review beneficial enough to merit all of this agony and stress? 

Let's look at the benefits.

  • One-to-one time with your employee--everyone wants the boss's attention.
  • An opportunity to let them know how much value they bring to the company and how much you appreciate them.
  • Feedback to facilitate growth.
  • Goal setting for the next year.
  • The reward of giving and receiving a raise or bonus.
  • An opportunity for the employee to voice their desires for the future, and other feedback and questions. 
  • A means to have a record about the employee's performance on file.

In reviewing this list of benefits, here's the first thing I notice: Each one of them should be a part of an ongoing process all year round, except for raises, of course. A Gallup study revealed that employees whose managers regularly communicate with them are nearly three times more engaged than those with managers who don't communicate regularly. The benefits related to frequent feedback, goal setting, and growth opportunities far outweigh the value of an annual review. The entrepreneurs I've worked with have observed improved morale and increased engagement and performance. In many cases, it's prevented potentially serious issues from cropping up.

There are potential pitfalls even to this more progressive and constructive approach. Here are a few tips on how to make your transition smoothe.

Take notes.

Doing away with annual reviews does not preclude the need for documentation. Keep ongoing notes on your discussions and the action steps that result from them. In the case of an underperforming employee, this is especially important.

Discuss reward and compensation.

Tell employees when and if they can expect a raise. The absence of an annual review could leave employees wondering about their financial future with the company.

Don't slack. 

It's great when you stop someone in the hallway to acknowledge an achievement, but a scheduled meeting still needs to take place. I have one client who meets with each of her five employees weekly, some of my clients hold meetings with employees monthly, and some quarterly. Determine your schedule by considering goals for your culture, the stage of growth the company is in, and how employees are performing. Avoid putting off a meeting with an employee for any reason; this sends the message that they don't come first.

Listen.

These meetings aren't about you; they are about the employee. Your time together is the perfect opportunity to ask them questions about their ideas and vision. Ask them for feedback about your leadership and communication style and let them voice their general concerns should there be any. 

Whether you have one or 100 employees, these changes may benefit you greatly. Begin developing your new process slowly if it feels more comfortable to you. Over the next year, meet with employees individually to minimize the work and stress of your annual meeting. Measure your success by observing increased engagement, productivity, contribution, and happiness. 

Published on: Nov 30, 2019
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