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Performance Management Study: 65% of Companies Still Use Annual Appraisals

An Ostrich sticking its head in the sand.

Our sur­vey reveals that fear of change and lack of ade­quate tech­nol­o­gy is hold­ing man­agers back

As CEO of Clear Review, I’ve writ­ten a num­ber of blogs and arti­cles about the ben­e­fits of reg­u­lar per­for­mance dis­cus­sions, but I am con­scious that, despite how pas­sion­ate­ly we feel about con­tin­u­ous per­for­mance man­age­ment, not every­one is adopt­ing it as a practice…yet.

For years now, var­i­ous sources have pro­claimed the demise of the annu­al appraisal, sug­gest­ing that it will be extinct (and I firm­ly believe that it will be). But how long will that take? To find out, we con­duct­ed a webi­nar (which can be viewed for free here) dur­ing which we asked 200 HR and man­age­ment pro­fes­sion­als about their exist­ing per­for­mance man­age­ment sys­tems. The respon­dents includ­ed HR exec­u­tives, senior man­agers, CEOs and busi­ness direc­tors and were from com­pa­nies from a range of indus­tries, includ­ing Oxford Uni­ver­si­ty Press, Voda­fone, Next, Visa, HMRC and Odeon Cin­e­mas Group.

Our sur­vey con­firmed what we sus­pect­ed, that, although com­pa­nies are inter­est­ed in mov­ing to con­tin­u­ous per­for­mance man­age­ment and see the ben­e­fits, not many have actu­al­ly adopt­ed this for­ward-think­ing approach yet. In fact, we found:

  • 65% of our respon­dents came from com­pa­nies who still used annu­al appraisals
  • 24% were in the process of mov­ing away from annu­al appraisals
  • Only 11% of our respon­dents were already using a con­tin­u­ous mod­el of per­for­mance management

So why were so many com­pa­nies hold­ing back from chang­ing their per­for­mance man­age­ment sys­tems? As part of the webi­nar, we asked what their major con­cerns were when it comes to embrac­ing a more agile approach to per­for­mance management.

60% of par­tic­i­pants are wor­ried about encour­ag­ing man­agers to have more mean­ing­ful conversations

Of our recip­i­ents, an incred­i­ble 60% of respon­dents were wor­ried about how they would get their man­agers to have reg­u­lar, mean­ing­ful per­for­mance con­ver­sa­tions. This is a valid con­cern. After all, it isn’t sim­ply the fre­quen­cy of per­for­mance con­ver­sa­tions that mat­ters — it’s the qual­i­ty. You want man­agers and employ­ees to devel­op trust­ing, authen­tic rela­tion­ships and dis­cuss mat­ters that are crit­i­cal to great per­for­mance includ­ing progress towards goals, strengths, areas for devel­op­ment as well as frus­tra­tions and concerns.

In our expe­ri­ence of sup­port­ing many organ­i­sa­tions with their tran­si­tion to a con­tin­u­ous per­for­mance man­age­ment cycle, this con­cern can be over­come giv­ing man­agers the appro­pri­ate train­ing and guid­ance so they under­stand the ben­e­fits of reg­u­lar per­for­mance dis­cus­sions and they know how to con­duct them effec­tive­ly. Here is a blog that cov­ers essen­tial talk­ing points to cov­er dur­ing one-on-ones, as well as a one-to-one meet­ing tem­plate.

Near­ly a fifth of par­tic­i­pants are wor­ried about vis­i­bil­i­ty with regards to reg­u­lar per­for­mance conversations

18% of our respon­dents were wor­ried about how they would get vis­i­bil­i­ty of whether check-in meet­ings are tak­ing place and how often. Again, this is a gen­uine area of con­cern and it can only real­ly be addressed by using appro­pri­ate per­for­mance man­age­ment soft­ware to sched­ule and track these check-in meet­ings. With­out this struc­ture in place, employ­ees can be for­got­ten and fall through the cracks. This is a clear road to employ­ee dis­en­gage­ment and low pro­duc­tiv­i­ty, giv­en how impor­tant man­age­r­i­al com­mu­ni­ca­tion is to workers.

Per­for­mance-relat­ed pay is anoth­er con­cern amongst annu­al appraisal devotees

Despite com­pa­nies know­ing that annu­al appraisals are not work­ing in their organ­i­sa­tion, some of them are strug­gling to say good­bye to them because year­ly per­for­mance reviews are a large part of how they deter­mine employ­ee bonus­es and rais­es. 12% of our respon­dents thought they would have trou­ble tran­si­tion­ing to agile per­for­mance man­age­ment because they were uncer­tain of how they would han­dle per­for­mance-relat­ed pay. How­ev­er, there are proven, work­able answers to this conun­drum and I explain them in detail in my free per­for­mance man­age­ment and pay eBook which details how to man­age per­for­mance-relat­ed pay with con­tin­u­ous per­for­mance management.

Rest assured that not only can you man­age per­for­mance-relat­ed pay issues with this new approach to per­for­mance man­age­ment, but your deci­sions will ulti­mate­ly be fair­er and more objective.

Some com­pa­nies are at a loss as to how to get senior buy-in to move away from annu­al appraisals

In 9% of our sur­veyed com­pa­nies, HR were find­ing that some of their lead­ers were resis­tant to change when it comes to drop­ping appraisals. This is under­stand­able as these lead­ers are less like­ly to have read the evi­dence that under­pins the rapid shift towards con­tin­u­ous per­for­mance man­age­ment. Plus appraisals have been around for so long, there can be com­fort in what you know, even if it’s ineffective.

To over­come this, it’s impor­tant to present lead­ers with clear evi­dence of how employ­ees and man­agers feel about annu­al appraisals in your own organ­i­sa­tion, com­bined with inde­pen­dent research on the effec­tive­ness of alter­na­tive per­for­mance man­age­ment meth­ods. Here is a handy 5-minute video aimed at senior man­agers which explains the ben­e­fits of con­tin­u­ous per­for­mance management.

Lack of appro­pri­ate per­for­mance man­age­ment soft­ware is hin­der­ing the tran­si­tion to con­tin­u­ous per­for­mance management

Lack of tech­nol­o­gy is prov­ing to be a big bar­ri­er to the adop­tion of con­tin­u­ous per­for­mance man­age­ment. Of our 200 respon­dents, 53% stat­ed that We have the tech­nol­o­gy but we haven’t found the right solu­tion”. A fur­ther 29% claimed, we have the tech­nol­o­gy but it’s not doing the job”. This amounts to an incred­i­ble 82% of respon­dents who are hav­ing issues with the software.

This is no sur­prise since most are using tech­nol­o­gy that was designed to facil­i­tate annu­al per­for­mance reviews rather than reg­u­lar check-ins and real-time feed­back. To be effec­tive, soft­ware needs to be pur­pose-built for the task at hand. When soft­ware is made to do some­thing it wasn’t orig­i­nal­ly designed to do, it ends up feel­ing clunky’ which will ulti­mate­ly turn off users and hin­der reg­u­lar per­for­mance discussions.

For­tu­nate­ly, con­tin­u­ous per­for­mance man­age­ment soft­ware such as our own Clear Review does exist. This kind of soft­ware is light touch, intu­itive and active­ly encour­ages mean­ing­ful dia­logue and feed­back, rather than act­ing as a barrier.

Clear Review is a proven con­tin­u­ous per­for­mance man­age­ment soft­ware used by for­ward-think­ing com­pa­nies around the world. Book a per­son­al demo today.