Why Getting Rid of Your Annual Reviews Won’t Work

You want to get rid of your annual performance reviews— and rightfully so. Nobody looks forward to those stressful, once-a-year meetings.

But simply getting rid of annual reviews isn’t a good idea. You’ve got to replace them with something better.

The “good” old days

The annual review process is clunky and antiquated, harkening back to the days when job security was the norm, employers and employees were happy sticking together for the long haul, and regular raises were pretty much a given. (Two martini lunches may have also been a thing.)

In this Mad Men environment, stability and consistency were the names of the game. Getting together once per year to review standard processes in a standard format was standard fare. Meeting annually to document last year’s performance and this year’s raise was generally seen as good enough.

But times have changed.

The workforce is much more dynamic and diverse. Business and technology are rapidly evolving and changing. Processes change. Consumer expectations change. Employer/employee expectations change. Technology and markets change. And, perhaps most importantly, employees are more mobile than ever.

If you wait an entire year to discuss employee performance, processes, metrics, needs and expectations, you will be having two completely different conversations. If that person is still on staff.

In the current business environment, stability and consistency can lead to a slow and painful death.

An inefficient model

Let’s think about things we do once a year, shall we?

  • File taxes
  • Cook a turkey
  • Try not to forget Valentine’s Day

Sure, you may be pretty good at some of these things. But imagine how much better you’d be at them if you did them more regularly. Chances are these skills would begin to come naturally and these occasions would be much more pleasant for everyone.

Let’s face it. You’re not going to be great at something you only do once a year, which is all the more reason to ditch the annual review process, right? But simply getting rid of it isn’t a good answer. Moving from awkward, inefficient feedback to no feedback won’t solve your two basic problems.

1. Both you and your employees need to talk about what’s working and what isn’t.

Employers need a workforce that can deliver results, and employees need to be clear about what those results are and how to best achieve them.

You can replace the annual review with a system for delivering timely, relevant feedback on a regular basis. Doing so will make performance management much more effective and much less stressful and intimidating. This is definitely a step in the right direction. It may even be the magic fix on the employer end of the equation.

But there’s a second piece to the performance puzzle that can’t be ignored.

2. Employees don’t just want feedback and kudos. They need to feel valued and appreciated.

Which means you need a plan to address career paths and, more importantly, compensation.

If you want your employees to stick around, they have to be able to see a future for themselves in your organization. Having weekly or monthly check in meetings with employees is great! And it would make sense not to talk about compensation during each of these sessions, because that would be serious overkill. But if you take compensation out of your feedback loop and just never bring it up, you’re asking for trouble.  

Like it or not, your employees expect to be recognized, not just with praise and accolades, but with raises. Sure, they may also want new titles, responsibilities, and promotions. But without an increase in compensation, all you’re doing is rewarding high performers with more work. Even if that’s truly not your intent, it’s how your staff will feel.  

Talking about compensation and pay increases is a natural part of the annual review process. So if you want to ditch the annual review, you’ll need to find a way to work those compensation conversations back into the rotation.

Feedback is great, but it isn’t everything

Creating a culture that doesn’t value employees is a surefire way to kick them out the door. But positive feedback, praise, and heartfelt appreciation won’t necessarily convince them to stay.

Employees associate high performance with increased pay. And many of them think the only way to get a significant bump in compensation is to change jobs and/or companies.

Don’t let this be the accidental message you’re sending your team. As you let go of annual performance reviews, make darn sure to put processes in place that address employee development, career paths, and compensation.

If you don’t, your employees will go looking for these things somewhere else.

 

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Photo by  Antonio Guillem