Blogs & Videos

Executive Corner – Time to Kill Annual Reviews?

Michael Clegg | 06/27/2022

It is mid-year, and all leaders should be taking stock of where their team is versus their goal. Why wait until the end of the year? Don’t question why you have attrition if you do annual reviews and do not do mid-year reviews or regular feedback sessions. 

Less than half of HR professionals support yearly performance evaluations. While I am not an HR Professional, I have been in Talent Acquisition since the late ’90s, and I wouldn’t say I like annual reviews – by themselves.

Only 8% of companies believe their performance management process is highly effective in driving business value, while 58% say it’s not an effective use of time. (Deloitte)

My reasons for disliking annual reviews:

1. They’re backward-looking when you should be facing forward

2.     They can hurt your team’s momentum

3.     Most employees hate the process

4.     They are too inconsistent from one leader to the next

5.     Annual reviews are a chore most managers do grudgingly

6.     They are VERY one direction – a review should have the leader receiving feedback

7.     They are an excuse for the leader to avoid regular evaluations

The only way annual reviews make sense is if you are doing regular 1x1s, providing regular feedback, and asking for feedback in return. If you want to drive an incredible culture with millennials and Gen Z, they overwhelmingly want and need real-time feedback. You will need to lead with your head, heart, and hands.

I have a client, Tom. He runs a small business, and he called me asking if I could help him with his attrition issue. Tom thinks he pays his employees well and has an excellent benefits package, and he’s lost on why he can’t get employees to their first-anniversary date. By the way, Tom isn’t alone because the attrition rate was 57% in 2021 in the United States. The overarching theme for Tom losing employees is that he nor any of his leaders were meeting with their employees regularly. Not meeting regularly is a recipe for disaster. Regular and consistent feedback is the recipe for success, not a time-wasting productivity suck many “managers” think they don’t have the time. Do this at your peril. If you want to read about having effective 1x1s, then review this article I wrote about having “bad meetings.”

One reason to consider keeping annual performance reviews is that employees are still ranked and rated based on their performance, whether they receive a written document or not. We mentally know if someone is average, exemplary, or a bad employee. However, we could be missing key insights to change our mental ratings. It is only fair that you discuss that ranking with them. Another reason is that an honest review provides transparency in some companies where it might not be a regular occurrence.  

Data suggests that employees want a fair process in most things, and a Harvard Business Review writes the following about fairness and the “three drivers of process fairness

1.      How much input do employees believe in decision-making: Are their opinions requested and seriously considered? Another is

2.      How employees believe decisions are made and implemented: Are they consistent? Are they based on accurate information? Can mistakes be corrected? Are the personal biases of the decision-maker minimized? Is ample advanced notice given? Is the process transparent? 

3.      How managers behave: Do they explain why they made a decision? Do they treat employees respectfully, actively listening to their concerns and empathizing with their points of view”?

Some critics of annual performance reviews say that “ratings” feature a “fixed mindset” vs. a “growth mindset.” People that get lower ratings tend to get locked into those ratings by their leaders rather than being coached and developed on how to improve. It comes back to the point that performance management is a regular occurrence. Communicating with people regularly allows us to create a certain cadence, and in many cases, this cadence helps us build trust. When there is trust, negative or critical feedback becomes a coaching opportunity instead of receiving a “fight or flight” response from irregular feedback. Employees need a chance to ask questions and develop better skills to improve their ratings.

If you are still doing performance reviews, here are some guidelines to follow when doing them:

1.     Be able to speak to the data that you used to build the review

2.     Make sure the scores and the data that are being reviewed are aligned with the expectations in their role

3.     Make is human; your employee is going to take it personally, so don’t pretend like they won’t

4.     Align your ratings with all the participants the same; don’t use different ratings for similar roles to avoid any biases

5.     Show appreciation for all of your employees, regardless of rating, and be specific with how they are evaluated

Whether you support annual reviews or not, you must take a deeper dive into the time spent with your leaders and their employees. It has never been more critical than it is now. The post-pandemic world has changed many things, and the financial crisis we are in is the next hurdle leaders will need to climb.

Subscribe on LinkedIn