5 Reason Annual Performance Reviews Don’t Work

Published On: July 6, 2022|Categories: Performance Management|

5 Reason Annual Performance Reviews Don’t Work

Published On: July 6, 2022|
5 Reason Annual Performance Reviews Don’t Work

Do you know that One-third of U.S. Companies is abandoning the traditional appraisal process? (Harvard Business Review, 2016)

Annual Performance reviews are becoming history and organizations are letting go of the annual process and adopting a continuous performance process. This has increased employee engagement and retention.

Human Resource professionals are evolving and creating new processes and methods to adapt to the dynamic workforce. As the workforce has changed and changing constantly it is becoming more challenging to keep the process suitable for all and there is no one size fits all solution. Few studies reveal that almost all (97%) of Gen Z is open to receiving feedback, and 67% want it in a timely constructive manner throughout the year.

Why did the system fail and stopped working?

The very reason the system failed is that it was conducted annually. People were not able to recall what they did throughout the year. Even the best performers were unable to substantiate what they did. This created an effect called the “Halo” effect. The halo effect is called as a type of cognitive bias by which our overall impression of a person influences how we feel and think about their character.

This in turn negatively impacted the employee. When a top performer is unable to project or share data on what they achieved it caused anxiety and there was stress around this process. Managers were even more at ill-ease as their team hated the process which was reflected in the performance. Also, Two-thirds of performance management systems fail to recognize high performers.

Lack of conversations

72% of respondents thought their performance would improve if their managers would provide corrective feedback. (Hbr.org, 2014)

The main reason for the failure of the annual performance reviews is mostly because there is no conversation between the manager and the team member. It is extremely important to ensure that the conversations are around the performance across the year now just a week or a day. The conversations and feedback that are bi-directional create trust and motivate the teams. If there is a constant feedback mechanism in place, then it becomes easy to create a collaborative approach and the team becomes accountable.

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Inaccurate Data

Since the process is done annually there is not enough data to evaluate the performance. Individuals are unable to keep track of their performance constantly and that became a great disadvantage. There was no data to decide upon and most of the time ended up in subjectivity

Prone to Bias

When there is a lack of data or insufficient data it did not facilitate data-driven decision-making. And hence there was extreme bias in the decisions made that eventually created an unhappy or not engaged workforce. Once the workforce is not engaged then there is a greater risk of productivity coming down. Organizations that practice continuous performance management outperformed the other organizations and increased productivity (66%),


What can bring a profound change to the entire process?

Making the process a continuous one is the primary requirement. While creating such a process we must plan it in a way that suits the culture of the organization. Also, the entire process must be bought in by the entire organization.

While implementing this process the conversations and feedback can be continuous, we can have weekly or monthly feedback sessions that help in understanding the gap and take support in bridging the gap as well

The stronger the conversation is the better the team is aligned. Ensuring performance conversations creates a healthy and a positive culture

And is evident that more than 94% of employees are willing to stay at their companies when the leaders spend time discussing and sharing feedback constantly.

A few tips to improve the process

  • Various methods help you improve the conversation and the important one is to share frequent feedback
  • Setting the goals for the team so that the expectations are set and tracked
  • Setting short-term goals will help in understanding the gap and allows you to iterate
  • Communicating the goals is important
  • Should be ambitious yet achievable

Technology and its advantages

There can be a change in thinking when we introduce technology to the entire performance management process. This is an essential intervention as a performance management platform can make the process adaptable and transparent as the decisions are data-driven.

The platform is capable of handling both OKR (Objectives and Key Results) and CFR (Conversation Feedback and Recognition) which ensures that the OKRs (Objectives and Key Results) published are transparent across the organization.

The organization Tree View option helps you to understand the hierarchy level performance too. Allows objective-wise conversations too.

Create Team and individual objectives to align with the company objective. The progress rollup helps you to understand the gap between what is planned and where we are now.

With the help of the Datalligence platform, we carefully set objectives and track them constantly. Allows you to align cross-functionally and eliminates any sort of ambiguity in the process. With the help of the platform, we can measure organizational level performance as well as people performance. OKRs are integrated with the Assessments and performance management to provide a holistic insight into an employee or a team.

Initiate a 1:1 conversation and add meeting notes to eliminate any communication gap. It is also important that the tool help you to capture the conversations around the Key Result areas. These conversations help you to understand the hits and misses during the quarter.

Feedback in the Datalligence platform is multi-Directional, we can share 180 or 360 feedback as well. Facilitates peer-peer feedback too.

The insights provided in the platform allow you to analyze the OKR adoption and the progress. Also gives a clear indication of the department’s performance along with the leaderboard.

Our performance coaches will be eager to talk to you and support you in implementing the right design that will fit your team and organizational culture. Schedule a free 30-minute session with our coach to help you design and implement an OKR-based performance management system. Implementing OKR based performance management system will help you create empowerment and align the team towards the organizational goal.