Annual performance reviews fail the test

Performance review time. Managers generally don’t like giving appraisals and employees typically don’t like getting them. It’s up there with root canal therapy and that feeling of being pulled over by the police. The march into the review room is accompanied by a feeling of light-headedness, queasiness, and a quickening of the heart rate – and that’s just for the reviewer.

I think the first failure of the traditional performance appraisal system is that it’s ‘annual’, and structured as a meeting with a set of forms to document it. These documents are for HR records; they are of little value to the employee or manager and will only ever be accessed again the following year when you’re wondering what you wrote last year. Companies conduct formal performance reviews this way because it’s somehow enshrined in the company’s doctrine. And I think this has come about from our classic human trait of avoidance. Most people will leave a work or university assignment as late as possible. Managers certainly do not look forward to bringing up the sensitive subject of someone’s tardiness, or body odor after their 10 km run to work each morning. So an annual review is, therefore, a mechanism for a company to put a deadline on performance management. Yearly or even half-yearly is a long time to let underperformance or behavioral issues go on, hence the idea of these periodic reviews is a failure.

Most reviews go like this. The employees who are being reviewed will typically believe they perform in the above-average category at the very least. Now, not everyone can be above average, and so their manager tells them otherwise. The employee ends up with a list of improvements to make. The improvements focus on weaknesses, not on strengths. Hence most performance reviews won’t improve performance.

Now, I’m not arguing in favor of eliminating performance appraisals altogether, because a good performance appraisal gives employees constructive, unbiased feedback on their work, and can, if done correctly, actually lifts performance and morale. However, I’m all for shaking up the ‘annual’ or ‘semi-annual’ performance review process.

Good performance management, I believe, is an ongoing process. It’s all about making personal connections with your team. Recognizing success when it happens and halting underperformance in its tracks. If underperformance is an issue, manage it head-on. If there is a better way something could have been done, then show your employee how to do it. Focus on future performance, as this is the only thing you are capable of influencing, and it’s what will have an impact on your business success. If you have key staff you want to keep, draft a career plan with specific performance goals for them. Draw up an action plan with key milestones which gives them a vision of the future and what they have to do. Use frequent catch-ups and meetings to assess all aspects of performance. Ditch periodic formal performance reviews you don’t need. Replace them with an expectation that you and your managers are to manage the employees continuously.

So evaluating an employee’s performance becomes an ongoing process that includes clarifying expectations, setting objectives, identifying goals, and providing feedback. Good performance management is built on communication between a supervisor and an employee that occurs throughout the year.

This may sound like more work than an annual performance review – and it is – but it will work, and it will work much better.

Ashleigh Swayn is CEO of Countplus mbt, a leading chartered accountancy practice offering accounting, financial planning, and finance expertise.