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Why Annual Appraisals Don't Work

Why Annual Appraisals Dont Work

6 Rea­sons why annu­al appraisals don’t work

There was a time when the tra­di­tion­al appraisal process was all we knew. Busi­ness­es of all shapes and sizes invest­ed sig­nif­i­cant time and mon­ey in annu­al appraisals because they thought it was the right thing to do. They didn’t realise that more effec­tive ways were avail­able to review employ­ee per­for­mance and help teams reach their potential.

Over the past decade, there’s been a shift in the per­for­mance review process across all organ­i­sa­tions — from SMEs to blue-chip cor­po­ra­tions. Busi­ness lead­ers agree that an annu­al review of per­for­mance is out­dat­ed and inef­fec­tive, with con­tin­u­ous per­for­mance man­age­ment tak­ing the place of appraisals in many com­pa­nies. A sur­vey by Gart­ner found that 81% of HR lead­ers are mak­ing changes to per­for­mance man­age­ment, favour­ing a year-round approach to per­for­mance reviews that’s more flex­i­ble, inter­ac­tive and impact­ful to employees.

If your busi­ness still uses annu­al appraisals to review employ­ee per­for­mance, it’s time to make a change. An updat­ed process could increase employ­ee engage­ment, boost per­for­mance, and improve your teams’ well-being, all while sav­ing your peo­ple from a tra­di­tion­al review sys­tem they hate. Read on for six rea­sons why annu­al appraisals don’t work in the mod­ern workplace.

1. One — sided

Tra­di­tion­al appraisals are typ­i­cal­ly car­ried out in a one-to-one set­ting where the man­ag­er gives feed­back to the employ­ee. The prob­lem with this approach is that the con­ver­sa­tion is often one-sided, with the man­ag­er telling the employ­ee how they per­formed and what they should be doing bet­ter. The employ­ee may feel they’re not allowed to give feed­back or dis­cuss goals besides the stan­dard­ised tar­gets addressed by their man­ag­er, mak­ing staff feel sti­fled and undervalued.

2. There’s too much pressure

It’s not hard to see why employ­ees dis­like per­for­mance appraisals — lim­it­ing feed­back to a year­ly meet­ing cre­ates a lot of pres­sure and ten­sion. Annu­al appraisals are for­mal and anx­i­ety-induc­ing, mak­ing it dif­fi­cult for both par­ties to speak hon­est­ly and open­ly. Man­agers may avoid tough con­ver­sa­tions, while employ­ees feel reluc­tant to address con­cerns about their role or com­pa­ny processes.

3. Inef­fec­tive goal — setting

Goal-set­ting is a cru­cial part of per­for­mance man­age­ment, but is set­ting goals annu­al­ly real­ly help­ful to your busi­ness when they’re bound to change? Long-term goals can eas­i­ly be for­got­ten or mean­ing­less as peo­ple and process­es change, mak­ing a key ele­ment of the annu­al per­for­mance review redun­dant. Your employ­ees need mean­ing­ful and adapt­able near-term goals reviewed reg­u­lar­ly and accu­rate­ly mea­sured against the cur­rent needs of your busi­ness, rather than what was a pri­or­i­ty months ago. Mov­ing to an ongo­ing approach to per­for­mance man­age­ment helps you achieve this.

4. Feed­back is limited

This is one of the biggest rea­sons why annu­al appraisals don’t work. Lim­it­ing feed­back to a year­ly per­for­mance review means it’s often mean­ing­less or irrel­e­vant, with obser­va­tions relat­ed only to what man­agers can remem­ber from the past year. With man­age­ment using a stan­dard­ised review process and sev­er­al employ­ees to run appraisals, feed­back can also be gener­ic and unhelp­ful — fail­ing to ful­ly recog­nise employ­ees’ indi­vid­ual strengths and achievements.

5. The focus is on the past

An annu­al appraisal focus­es on how employ­ees have per­formed in the past, rather than what they are achiev­ing in the present. Mov­ing from annu­al appraisals to con­tin­u­ous per­for­mance man­age­ment helps you trans­form your per­for­mance review process, enabling you to focus on cur­rent per­for­mance, pro­vide fre­quent feed­back and have a more sig­nif­i­cant impact on your business.

6. Not all employ­ee con­tri­bu­tions are measurable 

Rely­ing on a tra­di­tion­al per­for­mance review mod­el means employ­ee con­tri­bu­tions are mea­sured through one stan­dard­ised process, mak­ing excel­lent employ­ees under­val­ued. Not every employee’s per­for­mance can be mea­sured numer­i­cal­ly, as some roles involve more immea­sur­able func­tions such as research or train­ing tasks. When adapt­ing your per­for­mance review sys­tem, man­age­ment teams should con­sid­er these roles and ensure per­for­mance is being eval­u­at­ed fair­ly across dif­fer­ent departments.

Ready to move away from annu­al appraisals? At Clear Review, we’ve helped hun­dreds of organ­i­sa­tions improve per­for­mance reviews, engage­ment and employ­ee well-being through our con­tin­u­ous per­for­mance man­age­ment soft­ware. To see it in action for free, book a demo and have our expert team take you through the platform.