It’s Time to Re-Think the Annual Performance Review Process

Whether the reviewer or reviewee, very few people enjoy annual performance reviews.

For the reviewer, providing a performance review is a large responsibility. To conduct one properly requires a significant amount of planning and work. Reviewers must think back over a full year as they consider an employee’s actual performance. They should have a written document prepared with objective facts and observations. Then they are put in the uncomfortable position of providing some level of criticism, most of which will be poorly received and have a different impact than what was intended.

Then there are the individuals being reviewed. Their anxiety and tension levels are elevated over concerns this review will have an impact on their career, advancement opportunities, and pay rate. They seek constructive criticism and ideas for improvement but fear negative criticism. Most come away from their performance review both glad it’s over and that it only occurs once a year.

Attempting to sum up an entire year of work in a one-hour discussion is pointless. Overall, most employees feel an annual performance review is yet another painful corporate process. It’s no surprise that numerous studies have shown that annual performance reviews are ineffective and result in little, if any, performance improvements.

But year after year, companies keep enforcing this process. A recent study by the SHRM found that more than 72% of companies continue to mandate and conduct formal annual performance reviews.

I have been in the A/E/C industry for more than 35 years, and have been part of numerous annual performance reviews as both the reviewer and as the reviewee. It’s safe to say I can’t recall any of these reviews as significant, and I certainly don’t remember a lesson learned or meaningful experience from any of these sessions. The structured process does not allow for creativity or development of new ideas. Communication is stifled and measured. In my experience, never have these reviews resulted in producing greater outcomes, improved performance, or increased profits to the business.

The ineffectiveness of annual performance reviews does not, however, negate the need for employee feedback. Most employees want feedback and to understand how they are performing. They also want to understand how they can improve their performance, advance their career, and increase their pay. There is also inherent value for the business in providing feedback and criticism. Companies want employees operating in the most efficient and productive manner. Employers also need opportunities to address both employee concerns and areas for development.

The primary problems with the annual performance review process is that they are conducted annually, and they are considered a review. In order to move beyond this archaic process, I suggest having performance discussions on a regular basis, and an annual strategy meeting to set, implement and evaluate goals and initiatives.

I meet at least monthly with those who report to me, and we address a number of topics. Some of these meetings are very formal, while some are more relaxed. We look at how their time is spent and their level of productivity. We discuss the challenges they are facing, allowing me to provide advice and feedback. If I believe they are headed in the wrong direction in certain areas, I bring it up for discussion. If they are not performing well in some aspects of the job, we talk openly about how to solve the problem. If they also have direct reports, we talk about who is excelling and who is struggling, determining what we need to do to make sure everyone on their team succeeds. 

Our annual meetings are then a session of planning and strategy, sometimes with just an individual, but more often with small teams who share common work functions. We evaluate last year’s goals and consider what was accomplished, what was missed, and analyze the reasoning. We decide if those goals are still relevant and important based on what we seek to accomplish in the upcoming year. We then set new goals and initiatives, evaluate resources, and develop opportunities for personal growth. Other than the time spent evaluating the past year’s goals, our annual meeting is a very forward-looking exercise. There is no anxiety, uncertainty, or criticism. Our teams actually look forward to our yearly sessions as an exciting start to the year ahead.

This process of regularly scheduled one-on-one meetings, and an annual planning and strategy meeting has replaced the annual performance review process for most people in my company. In doing so, we have seen increased performance, greater attention to the overall goals of the business, and personal and professional growth among our teams.

It is time for the business world to phase out the traditional annual performance review process. These sessions are not productive and don’t improve the business. Companies should implement a system that fosters open communication among work teams and sets meaningful goals and initiatives for both the business and its employees. This is the process that will improve the business and produce greater results.

Brian T. King is an entrepreneur and the President and Owner of A M King, a Design-Build firm that provides multiple services required of highly complex facilities in niche markets throughout the United States. To connect with Brian and gain more of his insights on business strategy, career development and entrepreneurship, visit www.briantking.com