Is it time to rethink your employee performance appraisal method?

by Molly Johnston | Jan 04, 2023

time icon 6 mins

When it comes down to it, who actually enjoys performance appraisals? It’s not just the employees that fill with dread when their annual performance review is due, managers hate them too. Quite frankly, they’re awkward and nerve-wracking for all parties involved.

So, why are most companies so set on enforcing them? The truth is, employee performance appraisals and reviews are incredibly inefficient. In fact, almost 90% of HR leaders believe that annual appraisals don’t produce accurate results, meaning they’re more of a burden than a help most of the time.

It’s for this reason that the answer to this blog is ultimately a resounding YES. It’s clear that a traditional performance appraisal process is outdated, so your organisation must keep up with new performance management strategies to continue levelling up. 

Below we’ve listed some of the reasons why a traditional performance appraisal doesn’t work and what you can do instead. 

Why nobody likes performance appraisals

For most companies, their usual performance appraisal method includes a once-a-year sit-down meeting in December or January – AKA, probably the worst time to do so. Business is often extremely hectic for most industries in the lead-up to the holidays or just after. Clients often review relationships and companies are trying to close year-end or start afresh. As most would agree, it’s a pretty stressful time.

We’re here to tell you that an employee’s job performance review shouldn’t add to the stress. When done this way, employers are usually left with no other option than to rush essential performance feedback, leaving both parties unsatisfied with the outcomes of the meeting. 

Ideally, half an hour of prep time and an hour of meeting time is the bare minimum to review an entire year’s worth of progress. With a total of an hour and a half for each employee, that could add up to more than a week of work to add to everything else.

Performance reviews are also usually done once a year, or at most, twice a year. In other words, not often enough! Remembering every single thing you need to discuss with your employees over the last year in one short meeting is unrealistic. This means that managers are often left filling in the gaps with points pulled from memory and assumptions – rather than defined goals, KPIs and other success factors.

Apart from the logistics proving that annual performance appraisals are outdated and unnecessary, the sheer awkwardness of the meeting is enough to put anyone off. That’s why it’s essential to make feedback a priority throughout the year.

5 reasons why performance appraisals don’t work and what you can do instead

two coworkers having a performance review meeting

There are many reasons why a traditional performance appraisal method is no longer useful. Here, we’ve listed our top five reasons why we think they’re a waste of valuable time that could be used productively elsewhere and what you can do instead.

1. Employees need feedback more than once a year

A traditional performance appraisal process usually means managers will give a bunch of feedback to their employees on a once-a-year, or if you’re lucky, biannual schedule. As a result, employees and employers alike are usually left waiting for ways they can improve and the benefits that come from doing so.

However, in recent years, employees are rightfully demanding more from their workplace and career progression has soared on their list of priorities. One way to ensure your staff’s progress, both in terms of their career and personal achievements, is to provide feedback in a continuous format

Frequently giving your workers feedback means they can adjust their behaviours as necessary, without having to wait for their usual annual prompt. Continuous feedback helps your staff track their goals and objectives and gives them a kick-start on making the improvements that might be holding them back.

2. Performance reviews are not motivating or engaging

Employee engagement is fundamentally linked to business performance. According to 2017 Gallup research, engaged employees lead to about 17% more profitability, 41% fewer absences and up to a 59% reduction in employee turnover. And what could be less engaging than a yearly performance appraisal?

By limiting your interpersonal relationships with employees, they begin to lack the motivation and morale needed to feel happy and engaged at work. If they’re not feeling all of those things, they’re more likely to lose interest in their day-to-day workings and their performance is likely to struggle as a result. 

Recognising your employees’ good work, incorporating manager upskilling, and making employees feel part of your overall business mission and goals, you can quickly and effectively boost their performance and business output as a result.

3. Upskill your management team to help them give better feedback

Following on from the point above, upskilling your management team is essential for a better performance management process. Teaching managers how to give better feedback will enhance employee performance, motivation, and engagement. Plus, encouraging training and growth at all levels is always a good idea.

Effective performance management will help others to achieve results by building on their strengths, developing their skills, providing encouragement, and increasing their confidence. It also gives employees the ability to evaluate their own performance and find ways they can improve. 

This way, annual performance reviews become unnecessary and continuous feedback is not only encouraged, but the norm. 

4. Gaps in annual performance reviews mean they are ineffective

When it comes to annual employee appraisals, managers often forget a lot of the action points they were going to discuss with their staff throughout the year. This means a lot of their improvement tactics are based on the recollection of past events.

A manager who has been performing their job efficiently should have very few items to discuss during their annual review meeting. Effective management means bringing up job performance and action points with employees as they happen, rather than waiting for a formal occasion to mention them. 

Defining success together, implementing relevant KPIs and detailing how an employee’s role impacts the wider business goals can help form the foundation of more actionable conversations. 

A traditional, once-a-year employee appraisal is far too focused on past performance rather than what really matters: their future at your organisation.

5. Proximity bias can be an issue

In a modern-day workplace, you’ll likely have some employees working from home or on a hybrid basis. If you’re not careful, proximity bias can become a challenge. 

Proximity bias is the ‘out of sight, out of mind’ mentality some managers adopt (most of the time, unconsciously) which leads them to think (a) workers in the office are working harder than those working at home and (b) that work being carried out in the office is more valuable.

If proximity bias plays a part in how managers are assessing an employee’s performance, it means that the workers at home aren’t getting a fair chance when it comes to performance assessments. For this reason, an annual review becomes obsolete. 

To tackle proximity bias, employers can take on what some organisations call ‘360 degree feedback’ which means a performance evaluation is based on feedback from colleagues, subordinates, and their own self-evaluation, rather than just their manager.

Setting actionable goals and ensuring you make a point of defining what good performance means to you and your organisation can also help minimise proximity bias. That way, everybody has something to aim towards that can be measured, regardless of if they’re working at home or in the office. 

Another key thing employers can do to reduce the chance of bias in any form is to champion inclusivity in their organisation. By making DE&I a priority at your organisation, you can ensure a level playing field for ALL workers to succeed and progress, no matter where they’re based. 

It can be as simple as organising a group virtual meeting every morning or scheduling regular one-to-ones with those working from home to account for the passing comments that are likely to be made in an office setting. Use the versatility of virtual tools to your advantage and boost employee performance, morale, and engagement whatever their location.

In summary

It’s no wonder that nearly 90% of HR leaders believe that annual appraisals don’t produce accurate results. The most effective way to actually help develop employees is to give regular feedback year-round. 

At the end of the day, your people are your greatest asset and continued investment in their growth and development is critical to long-term business success.

For the sake of agility and pace of innovation, employees need to have more frequent touch points with their managers (and colleagues) to discuss what’s working and the areas for continued growth. Employers have an opportunity to stand out, attract, and retain the best talent if they’re willing to provide their people with these touch points throughout the year.

To find out more about how employee performance can help you to achieve your organisational goals, our useful guide takes you through the 7 principles you’ll need to master when creating a healthy culture, where performance-related conversations are welcomed – not feared! 

Start crafting a culture that works