Here and Now: Why Continuous Performance Conversations Are More Effective Than Annual Reviews

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Employees like feedback. In fact, 96 percent would like to get feedback from their managers regularly, rather than have to wait for an annual performance review.

And as it turns out, sitting down once or twice a year to discuss goals, behavior, and advancement isn’t an effective method of performance management anyway. Instead, a continuous performance management process is a much better way to keep employees engaged, productive, and thriving.

Performance Management Is Evolving

Take a look at your performance management system and ask yourself: “Why are we doing this?” If your current method isn’t helping you get the most out of your people or increasing engagement, then it’s certainly not the best system for determining pay and promotions.

Performance management used to be an annual occasion for providing constructive feedback and establishing accountability, but companies are beginning to reconsider what an optimal performance management strategy looks like — and they are realizing that the annual method falls short.

Think about it: Your employees want regular feedback, but if they have to wait for a formal review before any discussion takes place, the feedback they receive will no longer be relevant. What’s the point of feedback if your employees can’t use it to adjust their performance in the here and now?

Formal reviews are an expensive process: A company with 10,000 employees can lose $2.4 million to $35 million worth of working hours every year to the performance review process. And yet the ROI is often minimal at best. A key aspect of performance management is the benchmarking of future goals and the steps an employees must take to achieve them, but more than a quarter of employees say they don’t have these conversations with their bosses. If employees aren’t receiving the kind of feedback they need to improve their performance, businesses can’t expect to see much benefit from their performance reviews.

What’s Going Wrong?

To better understand why traditional performance management systems don’t deliver value, let’s look at some specifics. What, exactly, isn’t working?

1. Managers Aren’t Giving Regular Feedback

Managers often miss opportunities to show praise or coach in the moment. By the time they get around to these items at an annual review, the situations to which they refer are too far in the past. The feedback — positive or negative — is too late to be of any real use.

2. The People Providing Feedback Don’t Actually Manage the Individual Under Review

It’s common for reviews to be conducted by the HR department or upper management — people in supervisory roles who aren’t actually working day to day with the individual receiving the review. If the person giving feedback doesn’t typically interact with the employee, the feedback will either be based on secondhand information or come from a bird’s-eye view. Either way, the feedback will be neither accurate nor productive.

3. Managers Don’t Know How to Evaluate Performance 

Many managers never receive training on how to assess performance, give feedback, or craft an employee developmental plan. As a result, conversations become awkward, stilted, or even totally useless from the employee’s perspective.

4. You’re Trying to Squeeze Too Much Into One Meeting

Trying to review a full year’s worth of performance in one conversation means there’s a lot of ground to cover in a short amount of time. This leads to important topics getting merely cursory mentions, and critical talking points can slip through the cracks.

What to Do Instead

Now that we know what’s broken, we can take steps to fix it. Here are a few tips to get you started:

1. Praise and Address Problems in Real Time

Don’t pass on opportunities for performance conversations for the sake of protocol. Timely recognition of a job well done shows employees that you’re keyed in, and as a result, engagement may get a boost. Conversely, stepping in when a coaching moment presents itself allows you to give employees practical input they can immediately apply to their work.

2. Put Immediate Supervisors in Charge of Moment-to-Moment Coaching

You don’t necessarily need to remove upper management or HR reps from performance management altogether, but when it comes to feedback regarding day-to-day performance, it’s best for immediate supervisors who work with the employee daily to deliver the message. Employees will be more apt to take feedback seriously when it comes from supervisors with whom they have an existing rapport, and these supervisors can give more relevant feedback because they have a firm understanding of what the employee’s job is really like.

3. Train Your Managers on How to Give Feedback

Open communication between employees and managers is integral to a successful performance management system. Therefore, it’s critical that your managers actually know how to deliver genuinely productive feedback and feel comfortable doing so.

4. Use Formal Reviews to Focus on Major Points

There’s still a place for annual reviews, but their purpose needs to be reworked. Instead of being about employee performance today, these conversations should focus on the employee’s career goals and future development. What does the employee want, how can they get there, and what does that path look like? Annual reviews are much better suited for these long-term, high-level goals, whereas specific performance measures are better addressed in real time.

A good performance management system should help employers get the most out of their workers while also giving workers the tools they need to grow toward their own goals. To achieve such a system, you need to make your performance management process an ongoing part of employees’ professional lives, rather than a yearly event.

A version of this article originally appeared on the ClearCompany blog.

Sara Pollock is head of the marketing department at ClearCompany.

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