The Benefits of the Annual Performance Review

How to maximize the benefits from this required time waster

Business man and woman having a meeting
Getty Images/Robin Skjoldborg

 There are three key things to remember about annual performance reviews:

  1. They are a waste of time.
  2. They are required at many companies.
  3. They should contain no surprises.

A Waste of Time

Many HR professionals and managers believe that annual performance reviews are a waste of time. They are often too infrequent and too formal to be of any value for the person being reviewed. However, they are something managers feel they have to do or something they are required to do.

If you pick up a copy of the book "Why Annual Performance Reviews Are A Waste Of Time," however, you will find specific suggestions on how to improve annual performance reviews so they benefit the employee and the team.

Annual Reviews are Usually Required

Most companies require an annual performance review be completed for every employee. The Human Resources department provides a standard form and a required grading scale. Every manager dutifully fills out the same form, or has the employee fill it out, then spends as little time as possible discussing the results. Whatever discussion does take place is often combative, because the employee knows that this one document will determine the amount of their raise for the upcoming year. Because you can't escape doing an annual performance review, it's best to make them as useful as possible and when meeting with the employee try to get value out of the overall evaluation of their performance by comparing their work to others on the team, or in the department.

The reason companies require annual performance reviews is to have a method for gauging how to distribute annual raises. If each employee is given a grade, raises can be given based on where the employee fits into the grading system. Unfortunately, the result is that when you do an annual performance review, the only thing the employee listens to is their grade.

 

How to Make Annual Performance Reviews Beneficial to Employees

Using employee grades to appropriate raises is fundamentally flawed. It doesn't equate raises to how an employee helped the company achieve its goals. However, if you must use the system, use it to motivate your group to produce at optimum levels.

Do a performance review for each employee each quarter and share the results with them. This way, at the end of the year you're merely pulling together three quarterly reviews and adding them to the employee's fourth quarter review. Make sure the employee understands that your method is just a quarterly review so they can concentrate on the gist of their annual review when the time comes, rather than make them worry about their grade.

When their fourth quarter review is complete, you and the employee should have a clear understanding of their performance and, more importantly, their goals for the coming review period. You should both be able to identify the same appropriate grade based on your ongoing communication. If there is a difference of opinion, it's usually because the employee doesn't understand how their performance compares to others in the group. If the employee selects a grade higher than you select, make sure you clarify why.

At the end of this year-long process, you will have accomplished the following:

  • Given the employee feedback on how their performance is helping the group achieve its goals,
  • Clarified for them how their performance compares to others in the group,
  • Motivated them to continue to improve their performance,
  • Selected with them the appropriate grade from the company grading list.
  • Completed the annual review that is required.