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The Pros and Cons of Annual Performance Reviews

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As the terrified employee takes his fateful steps down the corridor, apprehensively drawing near to his manager’s door, he stops to wipe the sweat from his brow.

This is it: today he finds out whether the last year has been worth it. Whether his work has been good enough, his effort solemn enough, his strategies adept enough. Today he finds out how he has stacked up against his teammates for the last year. Today he receives his performance review.

On the other side of the door, a terrified manager restlessly taps her pen on her desk as she awaits the arrival of the next shaking employee. As she practices her lines, determining how to break the news, she debates whether being in this position is worth it at all. She wonders whether he has any idea that his numbers are behind, that he’s been receiving complaints, that his efforts are failing. She decides to lead with a few compliments to soften the blow, worried that her nervous words might fail her.


For some, annual performance reviews might feel like a scene in a drama movie due to their heightened stakes and lack of predictability. If everyone despises the process so much, why do executives insist on keeping them?

Let’s take a look at the annual performance review debate:


Interrupt Flow:

According to psychologist Csìkszentmihàlyi, people experience “flow” when they are “fully employing their core capabilities to meet a goal or challenge.” When individuals experience this phenomenon, they become constructive, passionate, and and fulfilled by the task at hand, “thereby tapping into a seemingly limitless well of energy” (mckinsey.com). The goal of management should be to promote this type of zeal, rather than interrupting with performance reviews. Performance reviews might cause individuals to focus instead on numbers and rankings that kill any sense of passion. By killing passion, management kills productivity.

Lack of Timeliness:

By definition, annual performance reviews are held on a yearly basis as opposed to a behavioral basis. Employees spend the entire year building either good or bad behaviors before they are addressed, and many have no idea that their behaviors are problematic when they walk into the conference room. Deborah Riegel of Boda Group describes why this is unsettling: “If it comes out like a giant sack of dirty laundry that the person hears only once a year, that is an ineffective review” (Bloomberg). Whether it is constructive criticism or the much-needed employee praise, feedback must be timely as opposed to piled up and then emotionally dropped at the end of the year.

 

Forced Conversation:

Truth be told, annual performance reviews are just as uncomfortable for management as they are for employees. Riegel claims, “It takes an emotional toll to deal with with the messiness of everything from defensiveness, anger, weeping, and passive-aggressive agreement” (Bloomberg). Because emotions run so high in annual performance reviews, it is highly unlikely that true progress can be made. Between an awkward manager and an angry/nervous employee, productive conversation would be quite incredible.

Reasons to Preserve Annual Performance Reviews:


Perfect Timing:

When management holds annual performance reviews, they often have the organization’s yearly goals and accomplishments in mind. By this time, they have witnessed the ways in which an employee has contributed to these goals, inhibited these goals, or remained stagnant and can address these issues with more insight. As opposed to holding constant performance reviews, beginning-of-the-year reviews, or various other types of reviews, annual performance reviews give managers more information to work with as far as both employees and projects are concerned. This works in the employee’s best interest, as well, as he or she has more time to prove himself/herself before the next review.

Better Backup Plan:

As Chris Cancialosi of Forbes points out, “leaders must ensure that there is something else in place before eliminating their company’s current processes.” Better yet, he suggests that each leader “make sure the new way is an improvement.” Because few executives can suggest better methods for providing feedback, many still choose to use annual performance reviews as a default. In spite of its flaws, it is an organized, centralized, tested way in which to provide feedback, unlike some of the newer, more uncertain methods that have been suggested.

 

The Real Problem:

Before ridding oneself of the entire annual performance review system, corporations must consider where the true problem lies. According to Fortune, performance ratings are often “despised not because the tools are bad, but because the users of the tools are inept.” Perhaps that has been the problem all along: performance reviews are not the evil in and of themselves, but they have been carried out incorrectly. In order to determine whether this is the case, organizations must determine whether management is well-trained to carry out reviews, whether they are being performed honestly and consistently, and how employees are responding. Each of these might be clues as to where the problem truly lies.



Where do you reside in the annual performance review debate and why?

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