Is it Time to Retire the Annual Performance Appraisal? by Diane Janovsky

Is it Time to Retire the Annual Performance Appraisal?

Who loves the annual performance review process? Anyone? Is that crickets I hear?

In my experience, it’s almost as painful for managers to deliver appraisals as it is for employees to receive them. Not surprisingly, research by Gallup shows only 14% of employees agree that the annual review inspires them to improve. One study even indicated it can make performance worse one-third of the time.

On top of unimpressive results, this once a year methodology is also time-consuming and expensive. With such a low ROI, it’s no wonder that many companies have been experimenting with different approaches to improve outcomes.

One of the most popular trends is a move to continuous performance management. This is a fundamental shift to a mindset of coaching for future improvement rather than critically assessing past performance to enable pay decisions. The key is frequent (usually weekly), honest and meaningful conversations where managers genuinely connect with their employees as individuals and provide timely feedback for development.

Novel concept? Not really. Considering that performance management is defined as “the process of continuous communication and feedback between a manager and employee towards the achievement of organizational objectives”, it’s actually just getting back to basics.

There is a model for this in the sports world. Would a professional coach wait up to 12 months to tell their players what adjustments they need to make to win a game? I think not. Yet that is what happens in most organizations with the annual performance assessment.

Research on businesses that have already implemented a continuous performance management system provides a compelling case for action. For example:

Gallup has found that team members of those companies are:

• 2 times more likely to strongly agree that they receivemeaningful feedback
• 2 times more likely to strongly agree they aremotivated to do outstanding work
• 7 times more likely to be engaged at work

And a survey by Betterworks showed the following results when comparing continuous vs annual systems:

• Increase productivity throughout the company (66% vs 35%)
• Engage the entire workforce (58% vs 37%)
• Retain high performing talent (63% vs 41%)

If you think that the time may be right for your organization to retire the annual appraisal, you should understand that adopting continuous performance management is a significant transformation initiative. Making the switch requires leadership and financial commitments for training and enabling technology, and there are also HR compliance implications to be considered. However, the results can be well worth the investment.

At HPISolutions, our purpose is to enable behavior change in individuals and teams so that people and organizations can realize their highest potential. Contact us for a complimentary consultation to learn more about how we can help you super-charge your performance management systems.