Did you know that only two in 10 employees say their performance is managed in a way that motivates them to do outstanding work? Traditional performance management programs are clearly failing organizations — and company leaders are taking action.
Among the more drastic measures, high-profile companies like GE, Deloitte, and Gap have eliminated performance reviews. Just recently, Block CEO Jack Dorsey replaced reviews with continuous feedback and real-time, transparent job performance ratings.
Is this an ongoing trend or a passing phase?
Common challenges with traditional employee reviews
It doesn’t come as a surprise that organizations are doing away with performance reviews, as these evaluations often face criticism from employees, managers, and company leaders alike.
1. They focus on weaknesses instead of strengths
Employees often complain that performance reviews highlight their weaknesses more than their strengths. Focusing primarily on areas for improvement can be demoralizing, leaving your team members feeling undervalued for their skill sets and contributions.
Too much negative feedback makes for an unpleasant situation that isn’t likely to improve employee performance. Just 19% of employees strongly agree that focusing on their weaknesses motivates them to do outstanding work. Instead, they may be more motivated to find a new opportunity where their skills and contributions will be recognized and appreciated.
2. They’re not transparent
Only 50% of employees clearly know what’s expected of them at work.
Unclear job expectations make it difficult for your team members to understand how their performance is being assessed. Employees may have feelings of uncertainty and anxiety during reviews, followed by frustration and anger at the outcome of their evaluations — particularly when evaluations are tied to raises and promotions.
Four out of 10 (43%) nonmanagement employees and 36% of managers and company leaders believe their organizations lack transparency in promotion decisions. This can lead your team members to believe that promotions are awarded unfairly.
3. They’re too infrequent
Three out of four employees (74%) receive a performance review once a year or less — and many don’t get much additional feedback. About a third of workers (34%) say they receive feedback often, 39% say they sometimes receive feedback, and 27% say they rarely or never do.
The average performance management process is insufficient for providing timely and relevant feedback. Waiting a year for feedback can hinder your team members’ professional growth and negatively impact your ability to reach business goals.
4. They’re biased
Bias in performance evaluations can be a significant source of employee dissatisfaction, impacting engagement, productivity, and retention.
For example, men report being called ambitious 2x more often than women and women report being called helpful 2x more often than men. Black employees get 26% more unactionable feedback than non-Black employees, despite only receiving 79% as much feedback overall. This kind of low-quality feedback makes employees 63% more likely to leave their organization.
5. They’re time-consuming
Managers often find the performance review process time-consuming, especially when they’re responsible for evaluating multiple team members. This can lead to rushed assessments and a lack of meaningful feedback, diminishing the overall effectiveness of performance reviews.
This issue extends to other team members when organizations use 360 reviews or calibration meetings as part of their review process. Formal reviews typically fall outside your employees’ day-to-day responsibilities and completing them can take time and focus away from other work.
6. They’re inconsistent
Maintaining consistency in performance evaluations can be challenging across teams with different leaders. Each manager may have varying criteria for assessment, leading to disparities in how your team members are reviewed, rated, and ultimately rewarded.
For example, a manager with a high-performing team could give one of your organization’s top performers an average review if they’re stack ranking their direct reports. Elsewhere in your organization, a more lenient manager might give each of their average performers a top rating.
These inconsistencies can create a sense of unfairness among employees, particularly if average performers are given raises and promotions that someone else deserved more.
7. They’re ineffective
Only 38% of HR leaders rate their organization’s performance management program as highly effective. These organizations report a meaningful impact on other HR initiatives like employee career growth, engagement, and retention. Programs at the remaining 62% of organizations show a lack of integration between performance management and broader HR strategies — and have a lower impact as a result.
Perhaps more concerning is that only 14% of employees strongly agree their performance review inspires them to improve.
Lackluster employee performance reviews have significant downside with very little upside at many organizations.
Benefits of performance reviews
Despite their flaws and challenges, performance reviews are a crucial part of an effective employee performance management program.
1. Look at employee contributions and progress over time
There’s no doubt that frequent communication is crucial for effective performance management, but individual pieces of feedback represent a single moment or brief period of time.
For example, an employee could successfully lead a project, but fail to meet the majority of their performance metrics. Or an employee could epically fail on a project, but have an otherwise excellent track record. These individual projects don’t represent the cumulative impact each team member has on the organization.
Performance reviews give managers and their team members an opportunity to take a step back and look at employee contributions and progress over time. What was once a weakness can become a strength — and that should be recognized and celebrated. Employees who consistently perform well should be rewarded in a way that aligns with their value to your organization. And employees who are consistently underperforming should already know they’re not meeting expectations well before their performance review takes place.
Business decisions — including who gets a raise, who to promote, and who to let go — are made based on cumulative impact . Performance reviews provide transparency about the inputs used to make those decisions.
2. Enable fair raises and promotions
Your compensation budget and opportunities for internal mobility are limited. Aligning performance reviews with raises and promotions allow you to look at each of your team members over the same time period and determine how to equitably allocate rewards.
For example, you may find an entry-level hire from the past year is now a top-performing employee who’s underpaid for their contribution and deserving of a promotion. Or you might see that wage growth over recent years has resulted in your average-performing new employees outearning your top-performing tenured team members. These scenarios justify an above-average salary increase for affected employees.
Many organizations also use review cycles to conduct pay equity analyses. This practice can help determine if demographic groups within your organization receive equitable compensation so you can address pay disparities alongside merit-based increases.
Compensation and opportunities for growth are often cited as the top reasons people quit their jobs. Making equitable pay decisions and rewarding your top performers with merit increases and promotions can help you retain more of your team members.
3. Guide employee development
There’s nothing wrong with learning for the sake of learning, though employee appraisals can provide some direction to employee development.
Performance reviews serve as a platform for discussing each team members’ strengths, opportunities for improvement, and growth opportunities. Are there specific skills an employee needs to learn to improve their performance ratings, earn a raise, or get a promotion? Let them know what those skills are and how they can learn them. Does your team member have a career growth goal in mind? Help them create a career path to get there. This type of strategic road mapping can be easily forgotten or pushed off during regular one-on-ones. Annual performance reviews provide a strong signal that it’s time to have these conversations.
You still can — and should — have these discussions outside of employee reviews, though incorporating performance development with your review process can help you motivate, engage, and retain employees.
4. Improve other HR initiatives
A successful review process can have far-reaching benefits throughout your organization.
For example, human resources professionals that rate their performance management program as highly effective report a meaningful impact on other HR initiatives:
- 74% see an impact on pay equity
- 73% see an impact on employee retention
- 71% see an impact on employee career growth
- 71% see an impact on employee learning and development
- 71% see an impact on employee engagement
- 68% see an impact on workforce planning
- 54% see an impact on succession planning
- 48% see an impact on DEI goals
Best practices for fair, effective performance reviews
Performance reviews often inform an employee’s career trajectory and compensation — so it’s important to get them right.
Implementing performance review best practices can help ensure a fair, transparent, and effective evaluation process that benefits your team members and your organization.
1. Train your managers
Effective performance management isn’t intuitive for everyone. Providing manager training enables your team leaders to conduct effective performance reviews and more successfully guide their teams.
Training should include guidance on setting performance expectations, delivering feedback, career coaching, and handling difficult conversations. This ensures that managers are well-prepared to navigate the complexities of the employee evaluation process.
2. Align on employee goals and expectations
Your team members need to know what’s expected of them so they can fulfill their job duties and achieve their desired career growth.
Managers should set goals with each team member during their employee onboarding process and discuss progress toward those goals during one-on-ones and performance reviews. Following evaluations, it’s important to reassess goals and discuss new expectations to ensure alignment between employee development and company goals.
This process helps ensure that nothing will come as a surprise during performance appraisals.
3. Check in regularly
Performance reviews are a great opportunity to recognize achievements and discuss development opportunities with team members, but they shouldn’t be the only time you share feedback.
Managers should conduct informal check-ins and weekly one-on-ones between formal reviews to foster a culture of open communication. Continuous feedback paves the way for continuous learning, which benefits your team members and your organization.
You might also consider increasing the frequency of your performance reviews. Many organizations are now doing formal reviews biannually or quarterly to provide additional structured performance feedback to their team members.
4. Use the right tools
The right technology can enable your team to conduct performance reviews more effectively and efficiently.
For example, a performance management system can track feedback throughout the year so it’s available to managers during review season. This can help combat recency bias, where employee feedback is too heavily focused on their recent performance rather than their performance during the entire evaluation period.
5. Share a mix of positive and constructive feedback
Performance reviews should highlight an employee’s strengths and contributions, while helping them improve their overall performance.
Acknowledge and celebrate your team members’ achievements during reviews so they know what they’re doing well. Recognizing accomplishments boosts morale and increases your employees’ motivation to continue performing at their best.
Negative feedback isn’t always easy to give or receive, but it’s crucial for effective performance management. Without it, your team members can’t reach their full potential — and your team’s performance can suffer. Make sure your feedback is actionable by focusing on problematic employee behaviors, providing specific examples, and suggesting ways to improve.
6. Incorporate a self-assessment
Performance reviews are often seen as one-sided, inaccurate, and unfair.
Integrating a self-assessment into your performance review process gives employees the opportunity to share their point of view. Allowing employees to reflect on their own performance encourages self-awareness, personal responsibility, and a more collaborative approach to performance improvement.
Take the time to discuss discrepancies between your team members’ self-assessment and feedback given by their manager, peers, and other company leaders. It’s possible that they’ve been misunderstood and simply need the opportunity to explain themselves.
7. Calibrate manager feedback
Managers across your organization won’t evaluate employees exactly the same way: Some may be too lenient, while others could be too strict, resulting in unfair outcomes.
Calibration meetings help ensure consistency in evaluations across teams — but they’re not without some issues of their own. Research suggests that calibration meetings could introduce bias into the evaluation process without some safeguards in place. For example, provide bias training for participants and assign people to look for bias in the meeting.
Participants should come to the meeting with written, evidence-based assessments of their employees’ work performance and competencies.
8. Offer career development opportunities
Employee performance reviews are only one part of an effective performance management program. You also need to focus on performance development to help your team members grow professionally.
Create employee development plans based on performance review feedback. These plans should outline specific actions, training opportunities, and resources to support employees in their professional development.
Employee development plans demonstrate a commitment to employee advancement and contribute to overall talent development.
Final thoughts: Performance reviews need a revamp, not replacement
The majority of companies (60%) continue to rely on annual performance reviews, though forward-thinking organizations are revamping their programs to make them more effective.
Continuous feedback should be done in addition to — rather than as a substitution for — performance reviews. This integrated approach gives your team members the benefit of both performance management strategies.
