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  • Writer's pictureSophie Drechsler

Why your annual performance review process needs updating

Traditionally, organisations will run a performance review or appraisal annually. This aims to provide feedback, improve performance and increase employee engagement.

A common example of how this looks includes a form with questions sent to five or six people asking what’s going well and what can be improved. Ideally these questions are asked of the person’s manager, direct reports, peers and external stakeholders they work closely with. This feedback is then shared with the employee and hopefully a development plan is put in place.

Image showing manager, peers, external stakeholders and direct reports for 360 review

I’ve experienced annual reviews like these and have seen the potential for them to be a lot better. This method can often result in getting feedback without examples to back them up or the wider context for it to make sense. This lack of clarity doesn’t help someone understand how they could improve. You also often see performance increase in the run-up to a review but fluctuate throughout the year as often there is no measure of performance until the next annual review.

The limits of annual reviews

There are a lot of companies offering great support to their employees. However, as The Chartered Institute of Personnel and Development CIPD notes, there has been increased debate over the past couple of decades on the usefulness of performance reviews.

Criticisms of the traditional approach include:

  • They aren’t frequent enough

  • They’re subjective and open to bias

  • They focus on past performance with little emphasis or action on future development

  • They create a false sense of increased performance around the time of review

  • If they’re too rigid with timing, people can miss out on feedback and the opportunity to develop depending on when they start with or leave a company

  • If they’re only once a year they can lead to increased anxiety or pressure in the run-up

  • If done badly they can lead to demotivation and disengagement

There is a kaleidoscope of factors that influence how you perform at work. These include (but aren’t limited to):

A pie chart with different factors influencing how you perform at work: Periods of transitions, such as becoming a parent, taking on a new role, bereavement, illness or injury, hybrid work environment, a pandemic!

We’re constantly evolving and changing. We have different drivers and different external influences that affect motivation. A check-in once a year simply isn’t sufficient. Continuously reviewing yourself, your people and your teams is critical.

As far back as 2014, Deloitte argued that annual reviews with rankings and ratings should be replaced with coaching and development. Through their research they found:

Only 8 percent of companies report that their performance management process drives high levels of value, while 58 percent said it is not an effective use of time.

What more can you be doing?

The key is reviewing performance in an ongoing and consistent way. Something with less focus on a specific point in time. Ideally this should be done in your weekly/fortnightly 1:1 check ins with your manager.

An effective solution that I offer, is doing an in-depth interview-based 360 review with the person’s manager, direct reports, peers and external stakeholders, followed by 6-12 months of coaching. This includes feedback reporting, full assessment and recommended development plans.

Having an interview based 360 instead of a form allows a much deeper understanding of the feedback being given and it gives more robust information for the employee to digest and understand.

The coaching element provides time and space to reflect, create action and change based on what was found in the review. It also supports personal development and can identify further education, training or support needed to develop any gaps in skills/knowledge for the employee to reach their full potential. More on what coaching can support with here.

A check in six months after the 360 review can be used to do a growth assessment. This offers accountability and further insight into whether performance, development and goals are being achieved and what progress has been made.

In respect to successful appraisals, the CIPD advise:

Employees’ reactions to performance appraisal are critical in determining whether performance will increase, so check in with them following performance conversations to see how they are reacting. In particular, focus on the perceived fairness of the appraisal.

A more collaborative form of appraisal with focused, individualised coaching provides just this.

Outcomes of an in-depth interview based 360 review:

  • Illuminate an employee's blind spots and increase their self-awareness around areas to develop

  • Provide a clearer understanding of what is working and what isn’t

  • A clear plan to move forward and improve confidence and performance

  • Any actionable goals or changes can be agreed to align the individual's values and purpose and those of the business

Benefits of an interview based 360 review:

  • Provides objective input from someone outside of the organisation

  • It shows you're investing in your people

  • Alleviates your role as manager by outsourcing some aspects of reviews and support to a coach

  • Helps create more of a partnership between the employee and manager to come up with an agreed development plan and goals to be worked on with a coach

  • Gives the space and time for thinking, processing, reflecting and planning in a deeper, more consistent capacity

Considerations of an interview based 360 review:

  • Time capacity of the employee to fully engage in the process

  • Budget available to cover the costs of the process and coaching

  • Who has access to this opportunity and ensuring a clear process in place to remain fair and in line with business needs

If you think you could improve your performance review process or would like a longer-lasting, more fruitful solution fill in this quick form to arrange a time to discuss.


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