Are you still following a traditional approach to performance reviews? It may be putting HR, managers, and employees at a disadvantage—and undermining your success. Highly inefficient and complicated, the traditional performance review process leaves HR bogged down with tedious tasks and unable to focus on higher-level priorities.
Almost half of all companies still give annual or biannual reviews, says the Society for Human Resource Management (SHRM). And too often, they’re not holding meaningful performance conversations in between. That’s a major problem for several reasons.
First, conducting annual reviews costs a lot of money in terms of lost work hours, says Gallup. Companies with 10,000 workers spend $2.4 to $35 million a year to conduct these appraisals, with little return. And one-third of the time, the traditional approach actually makes performance worse, they emphasize.
The traditional review process undermines engagement and morale. “Only 14% of employees strongly agree their performance reviews inspire them to improve,” writes Gallup. “In other words, if performance reviews were a drug, they would not meet FDA approval for efficacy.” And 95% of managers are dissatisfied with their company’s performance appraisal system.
In short, the traditional performance review process is not only tedious but also ineffective. Increasing employee engagement requires an upgraded approach. Let’s dig into the reasons why—and how to change the way your company handles performance reviews.
Table of Contents
The Challenges of Traditional Performance Reviews
By the 1960s, nearly 90% of U.S. companies used performance reviews, write Peter Cappelli and Anna Tavis in Harvard Business Review. Techniques like forced ranking, initiated in the 1980s by Jack Welch, undermined morale and created a sense of unhealthy competition. The typical manager spent nearly 5 weeks per year on performance reviews—and hated doing them.
Here’s why managers, HR, and employees all find traditional performance reviews a frustrating waste of their time.
Tedious, Time-Consuming Processes
Experts in HR often highlight the huge amount of time that traditional performance reviews require. These evaluations typically derail the efforts of HR and other managers, forcing them to abandon more productive tasks.
This time-consuming process requires overworked HR teams to handle numerous tedious tasks:
- Manual data entry of employee information
- Managing employee records, filing, and organizing paperwork
- Planning evaluation questions and rubrics
- Checking to make sure managers are meeting with employees
- Personally reviewing each evaluation and collating feedback
Further, these complicated processes aren’t designed to meet the needs of today’s fast-paced business environment. In many companies, goals and operations can change substantially quarter by quarter. A streamlined process allows companies to develop employees in response to these shifting targets.
Negative Effects on Engagement and Morale
Too often, traditional performance reviews have a negative impact on motivation and morale. They may assign a number or rank to each employee, which feels dehumanizing, as The Wall Street Journal writes. Instead of increasing employee engagement, traditional reviews cause it to decline. People want to be seen as their full, authentic selves—not reduced to a number.
Merging Incompatible Topics
The traditional approach combines too many topics into one awkward discussion. It’s difficult to have open, trust-centred conversations about development while simultaneously making decisions about pay and promotions, as Cappelli and Tavis point out. Managers find such conversations tough to navigate—and stressful. And employees feel too distracted by the weighty topic of pay and promotion to focus on their growth.
Furthermore, managers using a traditional process struggle to remember key points to discuss. They must wrack their brains to conjure up talking points from six to twelve months ago. That leads to much inaccuracy in traditional performance evaluations.
The Prevalence of Bias
Similarly, the traditional review process is riddled with bias. “Every single human alive today is a horribly unreliable rater of other human beings,” says Marcus Buckingham of ADP Research Institute. Managers, like all humans, each have biases. They frequently reward those who think, act, or look most like them—even when they don’t mean to do that.
Answers to open-ended questions frequently reflect managers’ bias more than employee performance, researchers from Stanford have found. Poor performance in past review periods can affect the current review—even if the employee has improved substantially.
Systems that track quantitative data have a major advantage over the traditional method in this respect. By tracking actual outcomes, they avoid reliance on opinions alone.
Lack of Relevance
When employees only receive a thorough review once a year, the feedback often feels completely disconnected from their current work. In some cases, it feels downright unfair—and it can undermine agility.
“Annual performance reviews are set in concrete, linked to goals made in January and often not revisited until December when it’s review time,” says Allen Smith, J.D. in an article for SHRM. Meanwhile, in fast-changing environments, employees must set new goals throughout the year. As a result, the feedback given in traditional reviews can feel largely irrelevant.
Incompatibility with Remote Work
Just 16% of companies have adapted their performance management approach to remote work, reports SHRM. Reviewing a remote employee once or twice a year will lead to a lack of clarity on their role and expectations. Plus, it fosters disconnection between the manager and the team.
With their inherent bias, cumbersome nature, and negative effects on morale and growth, it’s no wonder that traditional performance reviews sometimes do more harm than good. Given this, let’s discuss the advantages of taking an updated approach—and how to get started.
The Advantages of a Modern Approach
In 2012, Adobe scrapped its bureaucratic performance review approach to pioneer a new method. Rather than annual appraisals, their managers conducted frequent one-on-ones. Meanwhile, Deloitte moved to giving quarterly “performance snapshots.” Such efforts have begun gaining popularity in recent years, illuminating a better path forward.
Upgrading the performance review process will benefit managers and HR leaders in significant ways. A modern approach will save time and effort for busy HR teams and managers while increasing accuracy and engagement. Facilitated by the right software tools, it will also provide the guidance managers need. Armed with these solutions, they’ll deliver clear and thorough reviews that truly enhance employees’ growth.
Reducing Tedious Tasks for HR and Managers
“Reviews are too time-consuming,” writes Victor Lipman in Forbes. “The main complaint about performance reviews (from 31% of managers and 26% of employees) is that they take too much time.” From a management perspective, finding a more efficient way of fairly evaluating performance holds the utmost importance, he adds.
With a modern approach that leverages software, many forms can be automatically completed. Managers and employees receive automated prompts to complete their evaluations and set up a meeting together. Plus, the system analyzes the results. That way, HR can focus on higher-level tasks like addressing bias or developing training initiatives.
Providing Much-Needed Direction for Managers
Managers no longer need to anguish about whether they’re remembering all the key points in a review. When using a comprehensive suite of performance management tools, they’ll have several ways to refresh their memory:
- Data on goal achievement
- Records of instant feedback given throughout the review period
- Notes from a journal on employee progress
- Data from past reviews for comparison, to assess progress
Further, the review tools will provide clear guidance on how to evaluate employees.
Ensuring More Frequent (and Timely) Feedback
Rather than annual reviews, the modern approach focuses on continuous feedback and development. Today, 28% of companies are holding quarterly performance evaluations, a Workhuman survey found. And smart companies ensure their managers are holding weekly meetings with direct reports as well.
Such shifts are responding to the changing nature of work. Today, individual goals shift much more quickly than they did decades ago, rooted in projects that wrap up within the quarter. Referring strictly to annual goals doesn’t work anymore, as Amy Leschke-Kahle writes in MIT Sloan Management Review.
By providing in-the-moment feedback throughout the week, managers can help their teams become more agile. They’ll also catch and resolve mistakes right away, fine-tuning performance.
Managers can still hold end-of-year discussions, but they should simply be a recap of the year. With weekly feedback, employees are 5.2 times more likely to say their manager gives them meaningful input, notes Gallup. And they’re 3.2 times more likely to be motivated to excel in their work.
Adopting a Growth Mindset
Receiving strong feedback on performance will ignite a growth mindset among employees, HR experts emphasize. A modern review process celebrates accomplishments and provides crucial input when it matters, accelerating growth. With timely feedback, employees feel driven to take their performance to the next level.
Giving Employees Ownership of Their Growth
Similarly, modern approaches to performance reviews give employees more agency over their personal growth. These conversations are a dialogue rather than a lecture. Employees have the chance to weigh in on how they need to develop. They also work hand-in-hand with managers to design new goals and a plan for achieving them.
Separating Compensation from Development
A modern performance review process doesn’t tackle discussions on pay and development at the same time. As Gallup advises, performance conversations and discussions on pay and promotion should be held separately. This allows employees to focus fully on development during their performance evaluation, rather than feeling distracted.
Maintaining Standardized Measures of Growth
Having a clear system of quantifying performance outcomes remains critical. Having standardized criteria and protocols ensures an equitable approach to pay and promotions. For example, Adobe has implemented four standardized questions for managers to ask in quarterly meetings, SHRM notes.
Leveraging Software in Performance Reviews
Using the right software tools will help managers and HR professionals accurately assess performance. For example, Primalogik’s performance management platform gathers data that can inform these evaluations. Primalogik’s performance review software also generates questions centred on employees’ individual goals and roles. By streamlining the process in these ways, it eases the burden on HR.
In turn, HR can simply monitor the process to ensure each employee receives a fair and thorough review. By comparing managers’ responses with performance data, the software will even help detect biases. HR can then take action to correct them.
Software can also allow managers to document continuous feedback. Then, managers and HR can review it down the road. Of course, not every piece of feedback will be given via such tools. But using them frequently will provide a clear record of employees’ challenges, successes, and efforts to improve.
Performance Reviews FAQs
Here are a few common questions we hear about performance reviews.
Can you use 360 reviews in place of performance appraisals?
Experts do not recommend replacing performance reviews with 360 feedback. Why? 360 feedback is meant to be developmental in nature. It shouldn’t directly influence decisions on things like promotion and salary.
Can you bring up a new issue in a performance review?
Never wait for a performance review to raise an issue. However, if you’ve just noticed an issue while preparing for the review, you should absolutely discuss it. If it’s a longer-term issue, work to improve your management practices so such problems won’t get overlooked in the future. Also, be careful not to penalize employees unfairly for an issue that you haven’t brought up before.
Should leaders receive performance reviews?
Giving performance reviews to leaders is an excellent business practice. HR could conduct the reviews with people at the top of the hierarchy. When employees see leaders going through the process, they’ll feel more motivated to participate in it themselves.
Now you have a solid grasp of how to adapt your performance review process to changing business needs. Using the right tools will streamline the process, increasing employee engagement and promoting their success. Then your managers, HR staff, and leaders can focus on what matters most—developing talent to take your organization to the next level.
See firsthand how the right software can benefit your performance review process—or even help you revamp it. Request a demo of our product today.