Annual Performance Reviews: Are Their Days Numbered?

Today, many managers and human resource professionals question the value of the annual performance review. No one likes the process, which leads to procrastination, which signals employees that reviews aren’t very important. Plus, in today’s digital age, in which everything moves more quickly, a system that provides feedback on employees’ work months after it was performed is inefficient and obsolete.

In this article, author Anna Reitman discusses changes some firms have made in an effort to improve the performance review process. For example, a couple of years ago, Deloitte announced its intention to discontinue annual performance reviews, noting that the process consumed around two million staff hours every year. The Big 4 firm replaced annual reviews with a system of weekly “check-ins,” in which “team members and team leaders meet to align priorities for the next week.”

Team leaders use a four-question “performance snapshot” — with questions that can be answered by checking “strongly agree,” “agree,” “neutral,” “disagree,” or “strongly disagree” — as part of the evaluation process. A sample question might be “Based on what I know of this person’s performance, I would always want him/her on my team.” Other tools include team pulse surveys, career coaches, and talent reviews. Since implementing the new process, Deloitte has reported an 11 percent increase in employee engagement.

Many other firms have eliminated, or plan to eliminate, annual performance reviews. But making the switch can be difficult and doesn’t always succeed. According to recent research, most companies experience a 10% drop in employee performance when performance ratings are eliminated, “because of breakdowns in managers’ abilities to manage and a decline in employee engagement.” The organizations that have been most successful in moving away from annual performance reviews are those that adopt a quarterly check-in process in which managers meet with an employee to discuss challenges, goals, and objectives.

WithumSmith+Brown, based in Princeton, N.J., has embraced more frequent feedback, although it hasn’t eliminated the annual performance review . . . yet. The firm uses a 10-question, score-based tool called SPEAD (staff performance evaluation and development) every six weeks. Employees perform a self-evaluation and supervisors conduct a separate evaluation, followed by a 10-minute meeting meeting to discuss how the employee is doing and what can be improved. Withum has also implemented a career coaching program for everyone, including partners. Coaches meet with their “players” twice a year and gather feedback from those they work with. The firm’s goal is to eliminate year-end evaluations, but that won’t happen unless career coaches are doing a “superb job.”

The article also discusses the importance of software tools to facilitate ongoing feedback and keep employees engaged.

For the complete article, read “Want to jettison the annual performance review?”

From Journal of Accountancy, December 1, 2017.