Annual performance reviews: Are they becoming obsolete?

The annual performance review is becoming obsolete in the world of work that changed dramatically over the past few years, even before the pandemic, while the increase in remote work cemented new ways of working.

However, while many historic business processes and practices have long since fallen by the wayside in favour of more effective and efficient ones, there is one that obstinately remains in place: the annual performance review, says Advaita Naidoo, Africa MD at Jack Hammer.

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Heading into the second half of the year, many companies will once again start preparing for performance review season but Naidoo says now would be a good time to carefully review the relevance and value of this practice and consider whether it remains a useful tool or should be discarded in favour of new approaches to measuring performance.

“The annual performance review has arguably become little more than another item on the yearly to-do list of most companies and one which most people – leaders and teams alike – dread and can do without.”

Unpleasant ritual

Naidoo says millions of employees and managers across the world go through this unpleasant ritual, which was intended to measure and improve employee performance, every year.

“Instead, it ended up having little positive impact and rather more negative ones, including the fact that it is time-consuming, demotivating, subjective and often based on outdated or irrelevant criteria.”

She points out that most organisations fail to do annual performance reviews well and derive little benefit from the process.

“For it to be of value, a performance evaluation would need constant feedback on a weekly and monthly basis, in a cumulative and systematic way, benchmarked against very clearly outlined outcomes and behaviours in order to not be subjective.”

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However, saying that the annual performance review is now obsolete, does not mean that employee assessment falls by the wayside, particularly not where performance is linked to incentives such as increases, bonuses and promotions, she warns.

“There are better, less stressful, more fair and balanced approaches to performance management, which should be embraced sooner rather than later. Performance review culture should make way for constant feedback culture.”

Alternative approaches

Naidoo says alternative approaches to the dreaded annual assessment include:

• Constant feedback and evaluation based on actual behaviours and outcomes;
• Using automated tools and platforms that make the process easier and more objective;
• Providing training for managers on how to give and receive feedback effectively and in a non-confrontational and supportive way;
• Ongoing and open two-way communication and input from employees on their performance; and
• Drawing up of customised and flexible criteria and metrics that suit different roles and situations.

“If the original objective of the historic annual performance review was to assess and boost performance and evaluate performance in determination of incentives and awards, it is a no-brainer that all of this can happen much more easily and in a more frictionless manner if done on an ongoing basis with the aim of developing and supporting in real-time instead of as a once-off judgment day somewhere towards the end of the year.”

She says this approach serves the aims of building culture and performance on an ongoing basis much better.

“It eliminates the rushed flurry of unpleasant activity at an arbitrary point in the year. Organisations are therefore well-advised to consider whether they can do away with the annual performance review dinosaur and if they can, to do it.”