8 Reasons Why Annual Appraisals are Broken

by Roger Longden | Aug 14, 2015

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A number of high-profile organisations have recently given the Appraisal its marching orders – Accenture being the most recent.  But why?  Why is this bastion of business processes suddenly being given the bullet?

We’ve been doing some research recently where weasked 180 business leaders about their performance management procedures and we were pretty surprised with the results!

We discovered that whilst 92% of the small businesses we asked use performance appraisals, 55% believed that the way they managed performance didn’t help them achieve business objectives.

So, if over half of all businesses are not benefitting from their performance reviews, why are they still being used?

We think there are 8 factors that stop them being effective, and we’ll go through each one below. But first, let’s define the appraisal.

What is a Performance Appraisal?

A ‘Performance Appraisal’ is an opportunity for the manager to reflect on, and provide feedback for, past performance of a team member and explore their ambitions for progression and development.

However, often from an employee’s perspective, it’s thought of as a potentially threatening  process whereby management can end up demoralising or de-motivating the ‘workforce’.

We’ve identified 8 reasons why the traditional appraisal method needs to be carefully appraised.

1. The name is too scary

To many employees, even the name makes them shudder.

79% of the business leaders who we spoke to said they didn’t believe performance management was viewed positively in their organisation.  This is likely to be due to the “collective” bad experiences people have had as they have been through it.

fMRI (brain scans) have shown that even if we only hear of someone else’s kicking, it can cause us to react in the same way as if we’d received it.  We then find ourselves in a defensive and fearful state.

This is not good for a number of reasons:

  • It’s a barrier to  constructive and healthy  two-way feedback
  • Its can skew feedback (employees can often only remember the ‘bad’ feedback)
  • It stifles creativity (makes answering questions like, ‘What can we do differently next year?’ much more difficult)
  • It can stunt personal development
  • It can inhibit motivation to try new ideas

Employees often find that in the appraisal environment, they are much more defensive than usual, feeling they have to  justify decisions, rather than taking a few moments to objectively assess feedback (and, perhaps, accept it).

2. Appraisals are about Managers’ goals

One of the biggest problems with traditional appraisals, is that the manager is looking at the team performance from their own point of view.

  • Has the employee hit enough targets to help me hit mine?
  • Are they disruptive to me, the office, or others?
  • Are they easy to manage? How can we make them easier?

Traditionally, managers take their own targets and ‘push down’ instructions to their team on how to achieve those objectives.

In more progressive organisations, employees create their own work plans, carefully aligned with the business priorities, and the manager assumes the role of a coach, helping them achieve the goals each team member has committed to.

Coaching, as opposed to managing, has been proven time and time again to massively impact performance.

3. There’s an addiction to ‘command and control’

The typical manager has been bred to run their team the same way a colonel might run their army.

It’s often seen as weak for managers to ask for help, so traits such as decisiveness and strong leadership are seen as signs of strength.

Whilst that may have been the way in the Jack-Welch-1980-fire-them-all regime, these days, teams respond better to less draconian measures.

This kind of thinking in a performance review instantly puts employees on the defensive and creates a ‘them and us’ environment, which is not conducive to giving and receiving honest feedback.

4. The feedback may not be timely

By only appraising annually, a manager is potentially appraising something that happened up to 364 days ago, which clearly isn’t timely feedback! Feedback is exceptionally effective when it’s timely and the experience is still fresh.

As more and more Millennials join the workforce, we see the more modern ways of communicating coming to the fore.

For example, social media provides immediate connection and feedback, and that’s something that is becoming more and more expected in the workplace.

With real-time networks like Twitter & Facebook providing instant updates, waiting 12 months for feedback is a foreign concept to a lot of 18 year olds these days!

This is why more progressive companies are embracing corporate social networks, like Yammer to manage performance. However, this isn’t a ‘band aid’ – implementation has to be part of a larger, organisation-wide change.

5. It impacts Mental Health

Recently, a study from the University of Strathclyde suggested that there is a strong correlation between poorly implemented performance management,  and the degree of sickness and absence due to mental health and stress.

The report, “Performance Management and the New Workplace Tyranny” was commissioned by the Scottish Trades Union Congress, and interviews subjects from trade union shops, so it may not be fully impartial, but we all have anecdotal examples where mismanaged performance reviews have led to sickness and absence.

Surely performance management should be a positive thing?

6. It’s likely to be a Parent-Child conversation

If you’ve heard of Transactional Analysis, then you know that there are 3 principle states we can find ourselves in at any given time::

  • Parent
  • Adult
  • Child

Most performance reviews take place in the ‘Parent to Child’ state, with the manager assuming the ‘parent’ role.  This is because they hold the control over prospects and pay which ultimately underpins the feeling of safety and security for the employee.  This increases the risk of the employee assuming a child state because they may feel the need to defend and justify their achievements.

This is likely to skew the way feedback is received. We will never be looking for the positive when we are on the defensive.

This is difficult to overcome – as organisations have valued the appraisal process as a means of reinforcing hierarchy by passing judgement and reviewing behaviour – naturally, a very ‘parental’ activity. Similarly, responding to  feedback on behaviour can result in  very child-like responses.

The secret to a great review is to make this a Adult-Adult transaction.  This is done by starting from a point that the employee has something of high value to contribute (the manager already has, their authority gives them that) and taking an empowering and coaching approach to the conversation.

7. It’s one way traffic

Traditional appraisals are one-way only – the employee rarely gets the chance to review the manager.

However, we have a client who does two-way reviews, so the manager reviews the employee and the employee reviews the manager.

Whilst this works well for our client, it is a courageous policy, and has to be managed carefully.

  1. If the employee gets a bad review, would this encourage them to negatively review their manager’s performance in retribution?
  2. Would the manager be able to influence (either explicitly or not) their own appraisal, by, in turn, reviewing the employee?
  3. If it was anonymous, would this open up the system to abuse?

The other thing to consider is that this may still be a Parent-Child state, meaning the review of the manager may not fully disclose all faults.

8. It may not fit the project timescale

5 years ago, before ‘agile’ project planning became popular, organisations were setting 5-10 year plans, and sticking to them.

However, now a lot of organisations work in  3-6 month short cycles, so reviewing 12 month’s performance in one chunk, may not give an accurate picture of the individual project performance.

Clearly this is tough. When projects have different outcomes, goals and even team dynamics, one, over-arching appraisal just won’t cut it.

Could the performance of the most recent cycle influence the review of the entire year? Should each project be reviewed separately? How much extra work would this create?

Real-time feedback is what’s needed and there are some interesting emerging technologies out there which are starting to make this possible for today’s complex and distributed workforce.


We’re not suggesting appraising is wrong. In fact, we believe that performance management is one of the most important tools in modern organisational development.

We do however, need to consider the downsides, and ensure that any systems we put in place provide a fair, balanced and accurate review of each individual’s performance.