People & Culture
5 minute read

Annual appraisals do more harm than good. Here’s what to do instead.

Annual appraisals really don’t work. Only 14% of employees strongly agree that their annual performance reviews inspire them to improve - meaning that for the remaining 86%, they are at best a waste of time[1]. At worst, they do active harm - about 30% of annual appraisals actually decrease performance significantly[2].

What’s wrong with the annual appraisal system?

Appraisals sound good in theory. Employers make sure that at least once a year, line managers will sit down with their direct reports to address any issues, make helpful suggestions on how to improve performance, praise professional excellence and achievement, and set the employee up for success during the following year.

Unfortunately, the reality of the annual appraisal usually differs wildly from the ideal. For starters, appraisals tend to be highly subjective and often reliant on the managers’ memory. This means that the review will be likely to focus on areas that are of particular interest or relevance to the individual manager, and will probably only refer to the employee’s most recent activity.

So, what can you do instead?

All this shouldn’t lead you to the conclusion that you should skip employee feedback altogether. Quite the opposite, in fact: research shows that 82% of employees appreciate positive and negative feedback, and 40% are actively disengaged when they get little or no feedback[3].

The problem with the annual appraisal system isn’t the content, it’s the format. Positioning feedback as an “event” that happens once a year, and that is delivered by managers to employees, creates an exaggerated “us and them” mentality and puts too much distance between the performance and its resulting praise or criticism.

Instead of an annual appraisal system, try:

1. Building a feedback culture

At Learn Amp, we practice “benevolent honesty,” inspired by Kim Scott’s notion of “radical candour.[4]” We see giving feedback as an obligation, and receiving it as a gift. We give each other feedback after every significant interaction, whether that’s a customer meeting, a training session or a team meeting.

Crucially, this feedback is given freely regardless of our respective positions in the company, breaking down the traditional ”us and them” divides between managers and direct reports. Rather than an annual appraisal system, we have a culture of on-going, direct feedback, always from a place of kindness.

2. Scheduling regular alignment meetings

One of the biggest issues with annual appraisals is their infrequency. To be useful, feedback needs to be timely and relevant. Instead of a formal annual review, consider a weekly check-in instead. Gallup reports that employees who receive weekly feedback from their managers are:

  • More than 5 times more likely to agree that the feedback is meaningful
  • 3 x more likely to feel motivated to do outstanding work
  • And more than 2 x more likely to describe themselves as engaged at work.

As well as weekly feedback sessions, we recommend building a regular schedule of monthly one-to-ones, quarterly reviews tied to individual KPIs, and 6 month alignment meetings. You can use a People Development Platform like Learn Amp to schedule all these automatically and send reminders out to all participants, to make life easier for your line managers.

3. Providing “values based recognition”

Make sure you’re providing recognition for good work, not just feedback on areas for improvement. A Gallup poll found that 65% of employees reported no recognition for good work in their workplace in the previous year[5].

That isn’t just sad, it’s short-sighted - employees who reported receiving recognition and praise within the last week were more engaged, more productive, had better safety records and received higher customer feedback scores[6].

According to a study by the Society for Human Resource Management (SHRM), the best kind of recognition is what they call “values-based recognition.” This describes the process of praising and rewarding behaviour that exemplifies the company’s core values[7].

4. Training managers in the best ways to give feedback

While providing more informal, frequent feedback sessions should improve employee engagement and performance, this will only work if the managers in question are comfortable with providing feedback in a helpful, supportive and motivating way.

This may require additional training for managers, to help them think of themselves as acting as a coach to their direct reports. Effective coaching requires managers to think about their employee’s strengths and weaknesses on an individual level, and have a clear understanding of the objectives, priorities and needs of each employee.

 So, feel free to follow in the footsteps of everyone from Adobe to Accenture and scrap your annual appraisal[8]. If you replace it with a feedback culture, weekly check-ins, manager training and values-based recognition, your employees and your company will be the better for it.

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[1] More Harm Than Good: The Truth About Performance Reviews

[2] The effects of feedback interventions on performance: A historical review, a meta-analysis, and a preliminary feedback intervention theory.

[3] Feedback: You Need To Lead It

[4] Brutal Honesty and Radical Candor: 6 Ways You’re Getting Radical Candor Wrong and 5 Ways to Get It Right

[5] Be Nice: It's Good for Business

[6] ibid.

[7] SHRM/Globoforce Survey Reveals Human-Centered Approaches in the Workplace Help Organizations Better Recruit and Retain Employees

[8] The Performance Management Revolution