Problems With Annual Performance Reviews

by Srikant Chellappa Jun 12,2022

The People Strategy Leaders Podcast

with Srikant Chellappa, CEO

Annual performance reviews are outdated. They do not provide clarity regarding an employee’s performance, moreover they can lead to disgruntled and unproductive workforce. But still many organizations are using them to conduct yearly performance evaluations. A research conducted by Gallup found that 86% of employees do not feel that their reviews provide fair picture of their performance.

In this article, we will discuss some reasons for ditching your annual performance reviews and adopt a continuous evaluation performance evaluation system.

Problems With Annual Performance Reviews

Here are some reasons why progressive organizations are letting go of their annual performance review systems and adopting a more systematic, structured, and continuous process.

1. It’s Annual

Yes, one of the problems with conducting the annual performance review is that it is annual. An entire performance review just once a year. Therefore, annual performance reviews are rightly hard to sustain. To cram an entire year’s work into a two page report or a 15 minute session seems impossible and not feasible, yet, that is how it happens, which of course leads to more issues.

An annual performance review will work when in the time leading up to the review the manager has been constantly checking in with the employees, has been offering feedback etc. When all of that doesn’t happen, and all a manager has is a day or so to prepare for the process, it is understandable that the review process might proceed in a less than favorable manner. It is easier to carry out a performance review twice a year instead of just once. It reduces the burden placed upon the manager as well as the HR and it also allows the process to be more organic, thereby reducing the chance of the entire performance review process failing.

2. It’s Not Managed Well

This is unfortunately true of most performance review processes at organizations. Organizations see the process as important but they don’t know how to make sure that is a valuable to both the employee and the manager. Performance reviews might begin at the end of the financial year, but a good performance review process has already begun much before that.

In order to make sure that the performance review process is valuable to both the employee and the manager, from the beginning, managers need to set goals and objectives, revisit those goals and objectives monthly, conduct feedback sessions frequently, and have some method to track an employee’s progress. That is how a performance review becomes valuable. Otherwise it is just another process that we carry out in an organization.

3. They Disengage Employees From Work

Rather than providing any benefit to employees, annual performance reviews can dissuade them from the path of productivity. An ideal performance evaluation system should engage and motivate employees to work and stay productive, but an inaccurate review can do a lot of harm to them.

Recency bias is one of the culprits that lets managers assess their team members based on their most recent interaction with them. With limited time available for managers to review all their employees, it becomes apparent that they are unable to take an employee’s annual progress into consideration.

4. Interlinking Salary Hike To Performance Reviews

Often, performance reviews are linked to salary hikes, which makes the process more stressful for both employees and managers. Every employee wants to get a salary hike, but it depends on a manager’s assessment of their contribution to the organization. If managers are able to accurately gauge the performance of employees and provide them with positive reviews, they will feel motivated. Otherwise, they may end up fretting and becoming disengaged from work.

5. Inefficient Performance Evaluation Systems

The traditional performance review systems used by organizations lack continuous feedback, check-ins, and goal tracking features, which makes them inept for conducting a fair and accurate review. With the changing demands of businesses, customer personalization, and changes in working setups, such systems have become even more incompetent. The only solution available to organizations is to switch to a progressive and continuous performance management system.

Engagedly’s powerful and employee-centric performance management system allows real-time evaluation of employees and offers actionable insights to managers to develop their workforce. Its other useful features, such as 360-degree feedback, OKRs, and learning and development, aid in the overall growth and development of employees. Additionally, it helps in conducting quick surveys to understand the pulse of employees and offers interactive dashboards for quick interpretation of data.

The right performance management review

Srikant Chellappa
CEO & Co-Founder of Engagedly

Srikant Chellappa is the Co-Founder and CEO at Engagedly and is a passionate entrepreneur and people leader. He is an author, producer/director of 6 feature films, a music album with his band Manchester Underground, and is the host of The People Strategy Leaders Podcast. He is currently working on his next book, Ikigai at the Workplace, which is slated for release in the fall of 2024.

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