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 Business leaders agree that an annual review of performance is outdated and ineffective, with continuous performance management taking the place of appraisals in many companies.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.