Are Annual Performance Reviews Dead?

Continuous Performance Management Maria Hazir

Hated by managers and employees alike, annual performance reviews have been considered a necessary evil in most organizations for many years. However, rapid innovation that is happening nowadays has profoundly changed the way we are working, and consequently, many organizations are rethinking the ways they manage the workplace and their talent. More and more organizations are adopting different models that are better aligned with the requirements of a modern work environment characterized by increased collaboration, a less formal hierarchical business model and continuous feedback. Rather than employee evaluation, annual review or employee appraisal, today's discussion revolves around performance management, a strategic approach that aims to create and sustain an improved performance of employees, which should ultimately lead to enhanced effectiveness of the whole organization.

The current trends in employee performance management try to address the shortcomings of the traditional performance evaluations, which include the lack of follow-up during the year, a rating that is subject to both conscious and unconscious biases and the fact that some employee contributions can be difficult or impossible to assess on a numerical scale. An important aspect concerns goal-setting: in today's fast paced environment, the goals set during the yearly performance reviews are often no longer applicable in one year.

The new performance management methods are all about growth and development; they emphasize relationships and communication but also simplicity and flexibility. Performance management is understood as an ongoing communication process between a manager and an employee that occurs throughout the year. It is more about coaching and providing actionable feedback rather than assigning a numerical rating. The main focus is on improving performance and realizing the full potential of the employees (and the organization).

Unlike annual reviews that look at the past performance of the employee and rate how well they performed in their role and how many goals they met, continuous performance management is a forward-looking model that focuses on the present and future of the employee with the aim to identify ways to improve future performance and meet future goals. It is focused on the development and training of an employee and how that can benefit both the employee and the company. The employees need to understand how their unique strengths are helping their teams and organization achieve success. Because when they can identify the impact they are making, they can find purpose and value in their work, which boosts their engagement and motivation. There is a piece of compelling evidence for the idea that employees with higher levels of engagement and motivation perform better.  

A key component of continuous performance management is frequent check-ins. A check-in is a one-on-one meeting between an employee and their manager where, in a trusted environment, they typically set objectives or identify new objectives to be added, discuss priorities, progress against existing objectives, personal development, issues or concerns, clarify expectations, agree on action points, provide feedback, review results. Check-ins should be positive experiences rather than events that cause anxiety and stress. An environment of trust is critical for success here, and more frequent communication helps build that trust. The check-ins can occur daily, weekly, biweekly or (at least) monthly in different forms (in-person meetings, phone calls, software aided meetings). Thanks to these frequent check-ins, managers can more effectively track an employee's work achievements and weaknesses and address these promptly. The employees can benefit from receiving more timely feedback than that provided by an annual review, eliminating surprises, and leading to improvements much faster. Frequent check-ins also help document accomplishments throughout the year that would otherwise get forgotten by the time of the following annual review.

Indeed, real-time feedback on performance is a vital part of continuous performance management. Constructive feedback is an opportunity to learn, and it's essential for reinforcing positive behaviors, encouraging progress and correcting unwanted ones. Continuous performance management is about creating a culture where people are comfortable giving and receiving feedback to and from their colleagues and managers in order to grow and develop.

Flexibility in terms of goal setting allows for agile adjustments when corporate objectives and priorities change.  The emphasis is also on aligning personal goals with organizational goals that go from the individual to the organizational goals and not vice versa. The goal-setting happens as a collaborative process between the employee and manager. 

Continuous performance management offers an alternative to the existing review models, which is more in line with today's value-based, vision-driven and collaborative work environments and better response to the needs of the modern workforce. The change from the traditional yearly reviews to continuous performance management might be a challenging cultural shift, especially in long-standing organizations where the annual performance reviews have been a standard for many years. Like any cultural shift, it requires careful planning and management.

Maria Hazir
Project Manager