It's no secret that continuous feedback and more frequent performance check-ins are quickly replacing the traditional annual performance appraisal in many organisations. In fact, research from Workhuman shows just how much the popularity of the annual review has tanked in recent years: 82% of workers surveyed in 2016 said their organisation conducted annual reviews, compared to 65% in 2017 and just 54% in 2019.
Amongst HR experts, it's clear that the big annual appraisal has been dying for a long time. The trend seems to be a shift towards more informal and collaborative performance management processes – less of a formal evaluation of the results employees are achieving and more about assessing their performance, teamwork, and professional development holistically.
Despite this gradual shift in performance management approaches, research by Gallup shows that nearly half of the workforce still only receive feedback from managers a few times a year or less. For 19% of those surveyed, feedback is only provided once a year or less.
So, as increasing numbers of employers do away with the old-fashioned once-yearly performance review, how frequently should you conduct appraisals? Moreover, how can you increase their effectiveness without becoming bogged down in endless admin?
Let’s discuss the appraisal process in more detail and explore how to make it as effective as possible.
The problems with annual performance appraisals
As we know, the traditional annual performance review is pretty universally disliked. In addition to the 90% of HR professionals who consider the annual performance appraisal method to be inaccurate, 95% of managers dislike them too. Here are just a few of the many reasons that the annual performance review is not as effective as once thought.
Too infrequent for effective goal setting
One of the biggest problems with the annual appraisal as a performance management strategy is that it is too infrequent for managers to help employees set effective goals and track and support their progress towards them. The annual review prioritises long-term goals and may leave employees feeling unsure how to achieve them or demotivated to try in the first place.
In contrast, more frequent appraisals provide the opportunity for the setting of short, medium, and long-term goals that can be tracked and updated more easily. This results in more effective performance management efforts and higher levels of engagement and performance from employees.
Employees dread performance appraisals
With 34% of millennial workers reporting that their annual appraisal has made them cry and 57% of employees reporting that it makes them feel that they are in direct competition with coworkers, it's no surprise that this type of performance review is almost universally dreaded.
When performance is evaluated only once or twice a year, feedback is uncommon and frightening -- employees may feel like one instance of negative feedback invalidates their work across the entire past year. It's no surprise, then, that in one survey by Gallup, 30% of respondents said they had been so put off by a negative performance review that they started looking for jobs elsewhere.
In contrast, frequent informal assessments of employees' performance sets their expectations and gets them used to the process. As a result, they tend to dread these evaluations less and feel more open to feedback from their managers.
Annual approach leads to recency bias
A further problem with annual performance reviews is recency bias, where managers tend to remember an employee's performance over the past few months instead of throughout the entire year. It's not managers' faults – it's only natural to remember recent events more clearly than events up to a year ago. However, this means that performance reviews may present a skewed picture of employees' performance by only acknowledging their most recent work. If an employee has had an unusually productive or unproductive few months, this unfairly skews the evaluation of their performance across the entire year.
With frequent informal reviews, recency bias is no longer a problem. The higher frequency of check-ins means that employees' performance is more accurately assessed and it's easier to identify their issues or successes immediately.
Feedback giving only goes one way
When employee appraisals occur only once a year, they tend to be formal and one-directional. The situation feels unfamiliar and the stakes are high; employees' stress levels and discomfort with confrontation means that they are less likely to be completely open and honest with their managers.
Consequently, if employees are struggling with an aspect of the job, their manager, or even their personal lives, they are less likely to feel comfortable speaking up about it. Feedback only flows in one direction in these rigid, traditional-style appraisals, limiting the effectiveness of the process.
When feedback and performance reviews become more commonplace and informal, on the other hand, employees can become more comfortable sharing their own feedback with managers and HR. This makes performance management a more collaborative process, replacing the outdated and ineffective top-down approach.
You may also be interested in: What is the best way to track employee performance?
Frequent check-ins instead of annual or semi annual appraisals
It's clear that the annual or even semi-annual performance evaluation is an ineffective approach to performance management, so what's the solution?
Appraisals need to become more frequent and informal, with feedback becoming part of the day-to-day routine instead of a formalised one-off event. A shift from the traditional performance appraisal to frequent check-ins is already occurring in many organisations, with some occurring monthly or even weekly. In fact, 85% of workers who have weekly check-ins reported higher levels of engagement, while just 2% in this group said they were disengaged.
The frequency of this feedback depends on the size of your organisation, among many other factors, but in general it should be offered as often as possible. Ideally, employees should be receiving continuous feedback – an informal daily form of feedback without any of the pressure of an official performance review.
A weekly or monthly check-in can also be very effective, but even a mini review of performance every few months is far more effective than the annual performance review model.
Benefits of continuous feedback
When performance reviews stop being an annual or semi-annual event and instead shift to year-round continuous feedback, a wide range of benefits are unlocked. This way, employees receive ongoing guidance and support that helps them continuously improve their skills and performance. Here's a closer look at some of the benefits of real-time feedback over the traditional performance appraisal system.
Feedback is timely
Perhaps one of the biggest advantages of a continuous or frequent feedback model is that it allows feedback to be timely. This applies to both positive and negative feedback; employees can receive instant recognition for a job well done or can receive the right support if their performance lags. With a continuous performance feedback model, there's no waiting around for an annual appraisal to address achievements or performance issues – feedback can be given immediately. This eliminates the problems of recency bias and managers' poor memories, ensuring a more accurate and up-to-date performance management system.
Reduces pressure and stress for employees
With continuous feedback as part of an ongoing performance management strategy, employees become used to receiving ongoing assessments and support throughout the year. They can see performance management as beneficial to them, rather than scary or upsetting, and they become more motivated to participate actively in the process. This is beneficial to both employee wellbeing and performance – great for getting the best out of your people.
Coaching-focused performance management
By increasing the frequency of reviews and feedback opportunities, performance management can take on a coaching mentality, helping employees identify their own areas for improvement and devise personalised plans and goals. Appraisals become a collaborative process, with the employee feeling more open to support and suggestions rather than defensive in the face of feedback. This beneficial nature of a coaching approach in performance management will only increase over time as employees see their own improvement and professional growth.
You may also be interested in: How to make performance management perform
The downside of more frequent appraisals
In light of all these benefits, one question remains: is an increased frequency of performance reviews worth it when accounting for the associated increased admin load?
It's no secret that performance management is traditionally an admin-heavy exercise, requiring stacks of paperwork tracking progress, objectives, and various metrics for each individual. Multiply that out for a medium-sized or large enterprise, and that means hundreds of hours of work for the HR team. It's just not feasible for most HR departments!
However, there's a great solution for this problem: performance management software. By automating and streamlining the performance management process, HR software makes it easier for HR, management, and employees to get the best out of appraisals.
For example, XCD's HR software includes a performance management module with several key benefits:
- Discrete contributions from employees and managers provide a centralised and comprehensive source of all performance review information, allowing a collaborative process of performance management.
- Configurable and personalised review forms allow the performance management approach to be tailored for different employees or departments.
- Automated alerts remind everyone to participate in the appraisal process without the need for HR to waste time chasing people.
- Accessible from anywhere, including mobile and desktop, and intuitive to use, helping make feedback a simple part of the day-to-day.
- Real-time performance metrics bring a data-driven approach to performance management.
XCD's HR software has already helped many organisations transform performance management and alleviate HR's heavy admin load. For one organisation with more than 60,000 employees, our powerful performance management tool led to a 10% increase in productivity. Want to learn more about how HR software helped B. Braun medical boost performance thanks to mobile-accessible performance data, performance gamification with objectives linked to financial incentives, peer-to-peer feedback, and more? Check out the full B.Braun case study here.
Conclusion: Transforming performance appraisals
Overall, the answer to 'how often should appraisals occur' is a simple one: as frequently as possible. Indeed, it's time to move away from the idea of performance appraisals as an annual, one-sided evaluation of an employee's progress and instead see appraisals as an ongoing and collaborative process that continues throughout the year.
When performance appraisals become a part of your day-to-day life, your organisation can build a culture of coaching and feedback that goes beyond the capabilities of a one-off formal performance review. And, with the right powerful HR software, it couldn't be easier to make performance management perform.
Ready to find out more about how XCD HR and payroll software can transform the way you conduct performance appraisals? Book a demo today or take a look at our case studies to see how our software has helped a wide range of businesses.