Why the Dreaded Annual Performance Review is Hurting Your Business
Michael Heller, Engagiant Software, LLC
The dreaded annual review was created with good intentions and for decades has ruled performance managementpractices. However, in the past few years we’ve been provided with an abundance of research and innovative new methodologies that have prompted some of the world’s biggest companies, most notably GE, to shift away from the yearly practice. With a desire to simplify and improve performance management with more frequent performance feedback, GE is hardly the first company to be changing their methods. So what is it that makes annual reviews such a poor tool in performance management and why is microfeedback a better alternative?
One-Size Doesn’t Fit All
Annual performance reviews are notoriously one-sided interactions. Managers may encourage feedback from employees, but the very purpose of the annual review warrants far more benefits for one party: the company. Managers get to spend an entire session pointing out what employees did wrong, did right and (hopefully) how to fix it. While that sounds fine, think about this: what good is information about something an employee did wrong 6 months ago going to be for that person today? The opportunity for real, solid learning has since gone. If annual reviews did what they were supposed to—which is to positively influence employee performance—then employees wouldn’t dread them.
Did you know that 1 in 4 employees call in sick because of anxiety related to their performance review? The standardized, one-size-fits-all approach of annual reviews doesn’t provide employees with the kind of feedback that’s going to help them maximize their potential. This prolongs poor performance issues and delays valuable learning and development. In this fast moving world of endless opportunity, that’s exactly the kind of environment that’s going to keep employee retention at a distance, barely visible and fleeting, if at all.
Annual Reviews Do More Harm Than Good
The main goal of annual reviews is to improve employee performance; some may even achieve this to a certain extent. However, the negative effects of traditional annual reviews make them more costly than they already are. The human power needed to coordinate, organize and carry out performance reviews already makes them a costly way to manage performance—the performance review process can costhundreds of thousands of dollars for mid-size companies and that number rises the more employees that a company has. Even more disappointing is the effect annual performance reviews have on employee behavior, morale and loyalty. Consider these figures from a recent TriNet survey:
- 74% feel “in the dark” about how their managers and peers think they’re performing at work
- 62% of Millennials have felt “blindsided” by a performance review
- 59% feel their manager is unprepared to give feedback during reviews
- 57% of Millennials have reacted to a performance review by looking for a new job (28%), complaining to coworkers (35%), cursing (15%) or crying (15%)
To top this off: 77% of HR executives don’t believeannual performance reviews are an accurate representation of employee performance. Sadly, these weren’t the intended consequences of annual reviews, but new developments in microfeedback software offer much needed redemption in the practice of performance management.
Why Annual Reviews Will Never Work
In addition to the facts discussed above, annual reviews will never elicit the desired results. First, employee performance is deeply influenced by work relationships, which means for employee performance to improve, the feedback that they receive has to come from someone they trust and with whom they’ve built a solid professional relationship with. How can that kind of connection be achieved if managers aren’t communicating regularly? The short answer: it can’t.
Second, is the issue of timing. Managers who interact regularly with their staff should be providing meaningful feedback at the first sign of opportunity. Employees want this kind of communication so that they can learn and grow in their careers right now. They are self-improving individuals who want instant gratification. This is a good thing. Companies like GE, Accenture and Deloitte know this already which is why they’ve foregone annual reviews for more frequent performance conversations.
Third, alternatives to the dreaded annual review are everywhere and the benefits of using them are already casting a cloud over annual reviews. With the abundance of employee survey software and microfeedback platforms that make continuous feedback a reality, companies now have a quicker, more efficient, and cost effective approach to performance management.
Why Microfeedback Wins
Redesigning how performance is managed doesn’t have to be difficult. In fact, with the right preparation and tools, companies can easily change how they communicate and monitor employee performance—all while saving boatloads (yes boatloads) of money. And now, more than ever, they needto.
Did you know, according to ClearCompany, 86% of surveyed employees believe that the lack of collaboration or ineffective communication is the main cause of workplace failures? That is too significant to ignore. Here’s what a microfeedback platform can do for you:
- Employees who communicate regularly with their managers are three times moreengaged than those who don’t.
- 85% of Millennials would feel more confident in their current position if they were able to have more frequent performance conversations with their manager.
- 54% of surveyed employees with managers who are open and approachable are more engaged.
- Employees are seven times more likely to be engaged when their managers hold them accountable for the projects and tasks that they are working on.
- Companies spend a fraction of the price it takes to carry out performance reviews when they choose to implement a microfeedback platform.
With the job market up, employers should be doing everything in their power to retain the best employees and that starts with communication. The evidence that continuous feedback is a necessary and mutually beneficial way to manage performance is abundantly clear.
To discuss ways in which microfeedack can fix your performance management practices, contact Michael Heller, Engagiant Software, LLC, at mheller@engagiant.com.
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