Annual performance reviews are disappearing – here’s why

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“Someone on my team told me that she’s dreading her annual performance review so much that it’s one of the reasons she’s thinking about getting out of the corporate world entirely. It sounds a little extreme to me, but I do see where she’s coming from.  Thoughts?”

I get it. Who doesn’t get a pit in their stomach when that process gets going? A longstanding institution, the annual performance review is an often-dreaded ritual that requires managers to evaluate people’s performance in a variety of categories, related to core responsibilities, frequently rating them on a scale. The once-a-year process can include a self-assessment, manager feedback, formal scores or rankings and sometimes a compensation discussion.

For managers, this annual process can mean a lot of time, hassle, stress and paperwork without a lot of connection to actual performance improvements or day-to-day work. And many employees want more frequent and relevant feedback.  As a result, many companies are ending annual performance reviews entirely.

Research going back to 2011 shows that traditional performance review processes rarely help employees get better at their jobs and they often feel like a threat, says Sylvia Parish, global HRIS manager at Oceans Network Express (ONE) in London in an October LinkedIn piece. And giving formal feedback once a year is useless and out of date in a fast-paced world. “Today’s workforce, especially younger employees, expects regular coaching, not a once-a-year download,” she writes.

“Let’s be honest—most people hate it. Managers dread the paperwork, employees stress over ratings, and in the end, it rarely makes anyone better at their job.”

Miranda Leo, senior recruiter at Insero Talent Solutions in Rochester says the changes in generations in the workforce and the rise of hybrid/remote work after the pandemic also contributed to the view that performance reviews are outdated. “Combined, they’ve pushed companies to adopt more continuous, data-informed, and equitable performance management models.”

She cited a recent study by Deloitte that found that some 61 percent of managers and 72 percent of employees don’t completely trust their organization’s performance management systems.  “As a result, many employers are introducing tools that allow for real-time, multi-source (often anonymous) feedback and more holistic evaluation.”

The result of this evolution, Leo says, is that these new evolving processes are timelier, and have greater agility, along with a stronger alignment between goals, outcomes and day-to-day behaviors and an improved focus on “fairness, transparency and employee development.”

While these are constructive changes, companies that simply replace their annual review with a new process might not reach the quick success they’re looking for. “Any system is only as effective as the people who use it and the accountability built into it,” she says.

Adding to the mix now are emerging AI tools that are in embedded data analytics and continuous feedback mechanisms that are designed to improve fairness and transparency. Such performance management tools as Lattice, 15five and PerformYard claim are gaining popularity.   “Managers have increasing access to real-time clarity on goals, feedback and outcomes so they can coach in the moment, not months later,” says Dean Carter, co-author of a new book, “Employee Experience Design: How to Co-Create Work Where People and Organizations Thrive.”

But here’s the key: “Don’t just throw an AI solution at employees without engaging them in the solution,” he says.

“When employees see the data that informs expectations and have a hand in shaping it, the process becomes dramatically more fair, transparent and developmental. The companies getting this right aren’t digitizing old habits – they’re redesigning performance conversations around shared insight, continuous learning and human trust.”

Building trust has been the focus of the work that Vermont consultants Dennis Reina and Michelle Reina did with one Fortune 100 financial services group which completely overhauled  its performance review process.

Instead of a once-a-year performance evaluation, there were on “ongoing, trust-building” dialogues that company leaders had with their teams throughout the year. “It became part of how they engaged – an employee relationship-centered dialogue – rather than a one way ‘evaluation.’”

So instead of a “high stakes” meeting, managers had a structured conversation that included setting intentions, including a shared purpose – understanding how things are going and ensuring the employee had what they needed to succeed. “This alone lowered anxiety and opened the door to honest dialogue,” the consultants said.

The next steps involved checking expectations, including thinking about what was working well and where expectations needed to be clarified or adjusted as well as understanding struggles and obstacles, and finally, focusing on building a partnership, not judgments.

“The language shifted from an evaluative (‘here’s what you did/didn’t do’) to a collaborative ‘What are you experiencing? Where do you need more support? What can we work on together? And ‘what do you need from me?’”

As a result of the redesign, managers reported having more honest conversations, earlier insights into challenges and more clarity on how to support their teams and employees said they felt “respected, heard and treated like a partner in my own development.”

“Performance reviews shifted from being the dreaded annual delivery – full of surprises and curve balls – to a creative, energizing dialogue grounded in connection, learning and shared ownership.”

In its revision, Lock Search Group, a recruiting firm based in Toronto, is putting more focus on peer reviews – not in a rigid or formal way – but in a more intentional way. General Manager Ben Lamarche, who has been leading the charge away from top-down reviews, says the change is part of a “broader shift” the company has been taking focusing on small adjustments and improving flexibility and efficiency.

“Performance reviews used to be scheduled months in advance and take weeks of preparation,” he says. “Trackable metrics alone took up several pages of every evaluation, printed in color and in triplicate, of course. It was exhausting for both management and workers, and the truth was often that those documents never got looked at again post-review. They were simply too overwhelming, and improvements were never implemented despite our efforts.”

But now the process has been pared back. “We discovered that our existing feedback logs already told the majority of every project story, in real time and from the people who mattered the most – team members and clients.”

Since accurate data was already there, all that was needed “was observation and analysis, followed by in-the-moment adjustments.”

“It took the pressure off everyone involved improvements have been widespread,” Lamarche says. “Reviews are clearer, calmer and far less political. People understand exactly what they are being measured on, because the conversation is ever ongoing. Nothing builds to a crescendo; it’s dealt with as it comes.”

The company also made some salary adjustments so that raises and promotions can be implemented year-round instead of quarterly. “When people had to wait months to see recognition for their work, the reward lost some of its impact. The timing and accomplishment often felt disconnected.”

Adjusting the timing has been key for the performance review changes at JobLeads, says Nathan Putsey, tech talent acquisition manager. Instead of the annual performance review event, there are shorter check-ins that focus on setting goals and outcomes as well as growth and development.

Some automated tools that are overly complex can look great on paper but be “painful” in practice, he says. “Complex tools take away the real purpose of a performance review session, which is a fair and honest conversation between human beings.”

The company now uses “light” tools that pull together goals, feedback and notes in one place without “scoring” people, he says. “Now I feel like our performance reviews are less about a once-a-year “verdict” and more about helping people grow in the direction they want and where the business is heading.”

Managers at Work is a monthly column exploring the issues and challenges facing managers. Contact Kathleen Driscoll with questions or comments by email at [email protected]