Are Annual Performance Reviews Going the Way of the Pterodactyl?

annual performance review
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The annual performance review is undergoing a major overhaul at many companies, shifting from a sometimes cry-inducing end-of-year critique to a constant feedback loop focusing on an employee’s professional development.

Beth Jones, an expert in work management, told NPR that 75 percent of big companies — including Carroll, Deloitte and Cigna — have changed performance evaluations from focusing on past performance to emphasizing growth and goals.

Why the shift? Neuroscience has shown us, Jones said, that motivating people and driving change requires a steady stream of feedback.

The Opposite of Motivation

While performance reviews might be intended to motivate employees to improve, research psychologists at Kansas State University, Eastern Kentucky University and Texas A&M found that performance reviews had the opposite effect. Many employees tend to misconstrue even the most positive feedback.

Today’s workers find purpose through constantly learning and growing on the job and look to their bosses for mentorship and coaching, according to a recent report from UNC’s Kenan-Flager Business School cited in a Fast Company article on the trend. Because employees can now look up the information they need to do their job online, they see their bosses less as subject matter experts, causing them to see their bosses differently than their predecessors saw them.

General Electric scrapped its notorious rating system in which managers labeled an employees as “role model,” “strong contributor” or “unsatisfactory.” The manufacturer introduced a smartphone app for employees to assess subordinates and superiors on an ongoing basis.

Similarly, JPMorgan Chase & Co., the largest U.S. lender, introduced a mobile tool that lets workers send or receive instant critiques of their colleagues. For example, just minutes after a meeting, a manager can ping participants to get critiques of how an employee performed in the meeting.

Not all companies are relying on technology for such real-time assessments. Adobe replaced its annual reviews with a system called “Check In.” Employees and managers set specific goals at the beginning of each fiscal year and then check in every eight weeks or more frequently. At an annual “rewards check-in,” managers dole out raises and bonuses based on how well each employee met or exceeded his or her goals.

Crying in Annual Reviews Common

These regular check-ins are a far cry from the annual performance review, which has been blamed for making employees cry. According to an Adobe survey that measured 1,500 U.S. employees’ and employers’ responses toward performance reviews, 22 percent of the employees admitted they’ve cried at least once after a bad appraisal.

Of respondents, 20 percent considered quitting following a stressful review.

With survey results like that, it’s no wonder companies are starting to move past the outdated annual review. It’s starting to be seen not only as good business but also as a necessary adaptation.

Harvard Business Review said the end-of-year structure focusing on holding people accountable for past performance comes at the expense of improving current performance and grooming talent for the future, “both of which are critical for organizations’ long-term survival.”

If your company has yet to embrace a constant feedback system, there are still things you can do to make your annual review a positive experience. Prepare for your performance review by looking at last year’s review, writing down your accomplishments and setting goals for next year.

Find out if you’re being paid appropriately for your job title, experience, and education. PayScale’s free Salary Survey can help you find out where you stand.

Tell Us What You Think

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