The Changing Landscape of Performance Management – From Annual Reviews to Continuous Feedback

Caitlin Weiser, aPHR
December 8, 2023

As the end of another year creeps up on us, we mentally prepare for the inevitable- annual performance reviews will be here before we know it. Most of us have experienced the dread that comes with annual reviews. A thousand questions race through your mind as you anxiously await sitting down with your manager to discuss your performance over the last 12 months. You may be confident in your performance on any normal day, but there’s just something about annual reviews that makes you question if you’re actually meeting expectations. 

Anxiety has become an accepted part of the annual review process but have you ever stopped to question why? What if I told you there was a way to remove these negative feelings from performance management altogether? In this blog, I will explain how you can flip the switch on performance management and create a culture of growth and development that doesn’t leave your employees shaking in their boots.

Performance Management As We Once Knew It

At the end of each year, employees reflect on their work and complete a self-evaluation. Many self-evaluations include a number scale, where employees rate their performance in different areas from one to five. Employees then sit down with their manager to review their self-evaluation but every manager has different expectations for what each number rating means so there is no clear path for improvement. Individual performance goals for the upcoming year are set and the annual review process comes to an end with employee reviews getting filed away, not to be seen again for another 12 months.

Since the pandemic, how we work has drastically changed. Many of these changes, such as remote work and video conferencing, happened out of necessity but are now part of our standard operating procedures. Even with businesses adapting to this new normal and embracing change, performance management has seemingly remained the same.

Drawbacks of Annual Reviews 

In addition to being stressful for employees, annual performance evaluations are not an effective tool for promoting performance improvement. This is because the annual review process creates a culture where employees are only required to truly reflect on their performance once per year. The most significant drawback of annual reviews is the ease with which both employees and managers can lose sight of goals or forget them altogether. As the year progresses, priorities shift, which creates a misalignment between the goals employees initially set during their annual review and the overall goals of the business. This leaves employees working towards goals that are no longer aligned with the organization’s priorities, which can be unmotivating and lead to decreased employee engagement and poor business performance.

Additionally, many employees experience a notable gap of time between when they accomplish their annual goals and when they have their next performance review, which creates two issues. First, there is a missed opportunity to set new individual goals with employees to increase their contribution towards business goals. Employees who accomplish their goals halfway through the year aren’t striving to achieve additional goals outside of their day-to-day responsibilities because the expectation is that goals are set on an annual basis. Second, the delay between setting goals and discussing outcomes diminishes the impact of the feedback provided during the annual review, as memories of specific accomplishments are impacted by recency bias. If an employee accomplished one of their goals in March but made a big mistake in October, the feedback provided during their annual review in December will lean towards the mistake that happened in the back half of the year. The disconnect between when employees achieve their goals and when their performance is evaluated makes it challenging for managers to provide timely feedback. This hinders the potential to course correct and improve employee performance issues before they negatively impact the business or lead to termination.

The Future of Performance Reviews 

You should not change the fact that you have performance discussions with your employees but there are a few things you can change to positively impact your performance management process. First, remove number rating scales in your self-assessments and replace them with open-ended questions. Some examples of open-ended performance questions allow employees to articulate the challenges they faced and their top accomplishments. These types of questions allow employees to summarize their performance in their own words and turn the review process into a discussion rather than a comparison of ratings. Next is the frequency with which you discuss performance with employees. Performance feedback should be ongoing and does not always need to be formal. While we do recommend conducting formal, sit-down performance discussions and goal setting quarterly, implementing continuous performance management is the most effective way to keep employees engaged and aligned with business goals throughout the year.

What is Continuous Feedback? 

Continuous feedback is an approach to performance management where you provide employees with timely, ongoing feedback and coaching on their performance, behaviors, and deliverables in real-time. Continuous feedback is best utilized in addition to formal performance management discussions to keep employees focused, engaged, and aligned with business goals. While the formal performance discussion is where employees set specific goals, continuous feedback is how you ensure employees are reaching their goals. It takes the performance management process from being an annual event and shifts it to a year-round focus, driving productivity throughout your entire organization.

Advantages of Continuous Feedback 

Continuous feedback not only provides employees with greater insight into how they’re performing and removes the recency bias from the performance management process, but it also creates a culture where performance stays front of mind. Instead of employees completing their annual goals early or working towards goals that are no longer relevant, you build off of your team’s achievements or adjust priorities by setting new goals to keep employees engaged.  Continuous feedback also allows you to address performance issues in the moment. Providing constructive feedback throughout the year means employees can improve their performance in less time than if you waited to address the issue during their formal performance discussion. 

Celebrating achievements, shifting goals, and addressing areas for improvement on an immediate and ongoing basis allows you to increase engagement and productivity by providing employees with more feedback than if you only conducted performance reviews annually. Incorporating continuous feedback into your approach to performance management drives your business forward by reinforcing the employee behaviors that make the biggest impact. Employees quickly begin to understand what good looks like and continue the positive behaviors they are recognized for.

How to Implement Continuous Feedback into Your Business 

To successfully implement continuous feedback into your business, start by establishing clear goals and expectations for both individual contributors and managers. When introducing a new process, clear communication is crucial to ensure employees understand what is expected of them going forward. Employees should know what is changing, the reasoning behind the change, and how updating the performance management process will benefit their individual growth. 

If you currently conduct performance reviews once a year, transitioning to a quarterly review cycle will get employees acclimated to speaking about their performance more regularly. Once you have a quarterly performance process in place, establish regular meeting rhythms such as weekly or bi-weekly check-ins to create a structured approach to providing employees with additional feedback outside of their formal performance discussions. Managers should be trained on effective ways to deliver timely feedback in addition to constructive feedback to underperforming employees. Encourage managers to actively engage in their employee’s development outside of scheduled performance discussions and check-ins to begin to naturally foster a culture of continuous feedback.

After you have trained your team and have a more frequent performance management process in place, managers should begin to incorporate continuous feedback in their daily interactions with employees. Ensure they are providing specific, actionable feedback tied to observable behaviors and celebrate achievements and improvements that happen as a result of that feedback. This reinforces positive employee behavior and shows them feedback is provided as a learning and development opportunity rather than a judgment of their abilities, removing the anxiety from the performance management process. Once continuous feedback is happening regularly, it becomes a natural part of the work environment and drives organizational growth and success.

If You Need Assistance Setting up a Performance Review Cadence Our HR Consultants Can Help 

If you’ve found yourself stuck in an annual review cycle rut and are not seeing the results you want, Red Clover is here to help. Our team of consultants understands the nuances of implementing HR processes and will partner with you to create a customized performance management process that aligns with your organization’s unique needs. Contact us today to get started!

Photo by Vlada Karpovich: https://www.pexels.com/photo/stressed-elderly-woman-holding-her-head-7433882/

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