Why do performance reviews not work and how can we make them better?
Updated 31st March 2022
There's a lot of modern discourse about why performance reviews are rubbish. But, despite changing opinions, outdated performance review models are still extremely common in a lot of businesses. So, let’s look at why these problems exist. Then we can break down what HR professionals can do to actually provide effective performance reviews for employees.
The vast majority of businesses still use formal performance reviews
Performance reviews are one of the most commonly used management tools around. These days, managers can use virtual tools and services to streamline the performance review process. But even so, too many businesses rely on outdated methods and metrics.
It’s universally agreed that typical old-fashioned performance reviews stink. And yet they’re still extremely common.
In fact, in 2018, 80% of businesses were still using formal performance ratings for their employees. However, a whopping 95% of managers are dissatisfied with current performance appraisal methods. And, if even managers don’t like performance reviews, you know there are problems.
The trend of businesses moving away from annual performance reviews has continued through recent years. Companies like Adobe, Deloitte and GE really kickstarted the push to move away from end-of-year reviews. And in 2021, they were joined by a host of small-to-medium businesses favouring regular feedback-based check-ins over annual reviews.
So, you might expect the general attitude towards feedback as a whole to be pretty negative. But, as we’ll explain very soon, employees can actually thrive off regular feedback. It's just that outdated practices have given performance management a bad name. So, it’s time to break down why performance reviews are rubbish, and what you need to replace them with.
Traditional performance reviews are too irregular...
Performance management often relies on these incredibly spread-out appointments. That's exactly why performance reviews are rubbish compared to the methods we have access to today. The problem is when employees spend months or a year waiting for their next review.
When you're waiting for the boot to drop, the dread slowly builds up over time. If formal reviews are an employee’s only major source of critical feedback, it creates a sense of ambiguity. That's because they have no idea going in how the review meeting will turn out.
What you can do
Whether you choose to scrap formal review meetings or not, you’ll need a system for providing regular feedback. Ongoing feedback means that employees can be more confident when they sit down for a 1:1 with their manager. They’ll have a much clearer idea of their own performance going into the meeting.
...And, somehow, performance reviews are too time-consuming
You might think something that only happens once or twice a year couldn’t be very disruptive. But that’s far from the case. One reason why performance reviews are rubbish is the sheer volume of staff hours they consume.
Managers have to spend time poring over records to try and get an idea of each team member’s performance. Employees have to keep reflecting on their performance throughout the year with little guidance. If they don't, they have no idea if they’re going to be praised or penalised. And, on top of all that, HR have to help facilitate the whole thing.
What you can do
With performance management, there’s always going to be a place for a sit-down 1:1 with your manager. People value the human elements of their working lives, and it can be key to mitigating employee stress. It’s how you go about enabling those 1:1s that has to change.
Our weekly check-in is the ideal solution for timely, two-way feedback. Whether you’re submitting an update or reviewing one, it just takes a few minutes. Questions are customisable on an individual level, and each one keeps a history of recorded answers. All a manager and employee need to do is check back over the updates since their last meeting. And just like that, they’re on the same page and prepped for the meeting!
Performance reviews are an exercise in box-ticking
Of course, there's generally a manager meeting. But, as well as that, employees undergoing performance review are often have to fill out a bunch of forms. These detail their understanding of their own performance, and are literally box-ticking exercises. A lot of businesses assign performance scores to their employees.
The accuracy of these scores extremely questionable. Not only that, but they’re often used to determine pay. But money is far from the most effective motivator, which is another reason why performance reviews are rubbish.
What you can do
Scrap productivity scores and replace them with insightful, qualitative discussion. In the words of Tim Scott, People Director at Fletchers Solicitors:
‘This process was instead replaced with open and short questions asking how employees felt about the work that they were doing, what was going well and what they would like to do differently – this is a coaching and enabling approach. And what was the feedback from the organisation? It was harder to hold these deeper conversations, but the outcomes were felt to be much more positive and this can only be a good thing.’
Performance reviews can be unfair and inaccurate
With only one or two review meetings a year, it’s unlikely that an employee's manager will take everything they’ve done over the past year into consideration. Without proper ongoing feedback, managers become biased towards personal recollection.
What you can do
Employees care about what their peers think, even more than their manager’s opinion. This often gets overlooked. But it's essential for understanding how to reach your people. Implementing 360° feedback means people can anonymously highlight each other’s strengths and weaknesses. When people who work alongside a reviewee can weigh in, it creates a much more nuanced picture of their performance.
Performance reviews can be insanely expensive
Arguably the biggest reason why performance reviews are rubbish for businesses is how ridiculously pricey they can get. According to Gallup’s figures, it can cost an organisation of 10,000 employees between $2.4 million and $35 million a year to run performance reviews. That’s an eye-watering cost, no matter who you are.
What you can do
Remember, those astronomical costs are as much the result of lost staff hours as they are of actual expenditures. So, while a feedback system with a reasonable price tag is definitely a plus, you’ll also need a system that’s actually time-effective. It’s like not cleaning your house for a whole year. When you finally get to started, it ends up taking so much longer than if you’d just kept on top of it to begin with.