The idea behind the annual performance appraisal is to empower, engage and motivate your employees, as well as acknowledging their achievements. It is also a tool to provide constructive feedback on performance and is often linked to pay increases.

However, Gallup’s recent State of the Workplace Report 2022 revealed that just 21% of UK workers are actually engaged. To add pressure on the performance review, HR Review’s survey discovered that only 35% of employees believed their pay is based on their actual performance.  

So, are annual performance reviews worth it or should they be scrapped?

What is a performance appraisal?

If you’ve never been through the performance appraisal process (and some people will say, ‘lucky you’!), let’s just give you an overview of what they are.

It is an annual formal opportunity to talk to your line manager (employer) and review your performance/progress within your role and company, discuss and agree your targets/goals for the year ahead, consider your career plans as well as dealing with any wider issues in the workplace. It should be an open and honest discussion, with both sides offering constructive feedback.

They are usually linked to HR’s performance management system, which means the appraisal process is evaluated, documented and held on your HR file.

Types of performance appraisal

The method of performance appraisal can be broken down into four categories:

• 360-degree appraisal – the most common form of appraisal used by companies, the manager gathers together their information about the employee’s performance, usually through a questionnaire that is completed by the employee’s supervisors, group members, co-workers and the person themselves.
• Self-assessment – employees are asked to rate themselves in a set of categories, such as job performance, attitude and application, behaviour and time keeping. This is usually done on a scale of 1 to 5.
• Peer assessment – similar to the self-assessment in format but it is the employee’s peers, like team members and co-workers, that rate the employee’s performance. This format can often be used in combination with a self-assessment.
• Negotiated appraisal – in an effort to establish a greater level of objectivity and fairness, this appraisal method brings in a mediator to help in evaluating the employee’s performance.

There are many different ways of conducting a performance appraisal and which tool adopted is down to the company. But with HR departments claiming that performance appraisals are not as helpful a tool as they’d like, managers complaining that overall the things that need to be discussed are often avoided, and employees wanting to receive more regular feedback, maybe we’re at a place where time needs to be called on the process.

Why performance appraisals don’t always work

Part of the problem is that most line managers are not trained in conducting a performance appraisal. When you add into the mix the issue that it is supposed to be a formal process, and most managers have a more informal relationship with their team, that’s a fall at the first hurdle. But that’s not the only reason why appraisals don’t always work…

• Linked with salary reviews – in most cases, appraisals are inexorably linked with salary reviews and annual bonuses. This raises the impact on the review significantly, creating a great deal of anxiety for both parties. Managers will be acutely aware that any negativity could lead to angst and tension weeks before and after the appraisal, which will affect the employee’s productivity levels and wellbeing. So, difficult subjects and criticism, albeit constructive, will be avoided.
• Annual reviews are too inconsistent – any good manager will regularly review their team’s performance, as well as that of individuals, to ensure they are meeting their monthly goals or targets. This entails weekly conversations and exchange of feedback to help everyone keep on track to reach their objectives, as individuals and as a team. It often leads to adjustments and improvements being made, too. Employees welcome this form of continuous, constructive feedback so, why do you need an annual review?
• Gaps in the appraisal equals a lack of evaluation – who can remember what happened throughout the year? In all honesty, few employees will be able to remember all the events over the previous 12 months, and managers certainly won’t. In addition, most people’s emotional recollection fades over time. Of course, the ideal scenario is that both employees and managers keep a detailed account of every event but in reality, that doesn’t happen. This renders the performance review almost useless.

This doesn’t mean to say that performance reviews per se are not worth the paper they are written on. When conducted correctly, they can prove to be a very useful tool for employers and employees. They present an opportunity for both parties to give useful feedback, to address any issues, to clarify expectations and to establish employee goals for the year ahead. However, is it time to take a different approach?

A different approach to performance reviews

Every manager/business owner knows that employee motivation and engagement is a major part of the business’s success. Without a happy, strong team to drive the business forward, there will be little productivity and negative results.

There is little doubt that performance management is warranted; it helps employers understand and appreciate the needs of their workforce, gives them an opportunity to acknowledge and praise achievements, improves collaboration and fosters a proactive environment. For employees, it helps to develop their skills, guides their career progression and improves their relationship with their manager.

But the days of the annual, or even bi-annual, performance review are very much numbered. Reviewing and evaluating an employee’s performance throughout the year using a more holistic, collaborative approach is much more likely to boost morale, motivate and engage staff, and empower them to take responsibility for self-improvement. Add in rewards for work well done and outstanding achievements that are recognised by everyone will leave with a workforce that feels appreciated, and loyal.Auxato is a leading executive search and recruitment firm in the UK specialising in the communications, marketing and PR sectors.  We pride ourselves in developing career long relationships with our candidates and clients, working towards finding the perfect match. Check out our website to view our latest jobs and get in touch to see how we can work together.