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Is it Time for You to Change Employee Performance Reviews?

Human Resources

The purpose of the traditional annual performance review is being revolutionized, changing the way businesses are conducting employee reviews and goal setting throughout the business world.

Management teams are adopting a continuous performance management system in place of the traditional annual performance review. There are compelling reasons a business owner may want to consider making a switch to performance management practices that occur on an ongoing basis, rather than annually.

What’s happening in regards to changes in employee performance reviews?

The purpose of the annual performance review has generally been to assess employee performance. The trend is moving away from that traditional style, and toward a more contemporary ongoing review process, with a focus on an employee's performance as it relates to the company's performance and goals. The shift is toward a less formal, more positive, continuous strengths-based process.

What are some limitations with the annual performance review?

With traditional annual performance reviews, employee expectations of merit increases and bonuses, as well as noting areas for improvement, are the focus. Rarely does the focus include future performance objectives and goals, and how these correspond with the company initiatives and performance. These discussions tend to focus on past behavior, not accounting for future goals and areas for development opportunities. Areas for improvement and growth can be missed over a twelve-month period if feedback is held until one designated time for review.

performance review trends

In contrast, having regular conversations about the company's performance and objectives, and how they align with an individual's performance and development, can change the focus and create a cohesive and tangible relationship between the employee and the company. The emphasis is on building an agile workforce that can adapt with the ebbs and flows of business, which is crucial for a company to remain competitive, while also fostering employee growth.

What industries are adopting this new approach?

Continuous performance management can be implemented in both service and manufacturing environments and industries. For the manufacturing industry, it can be a natural fit to adopt by aligning with Six Sigma and ISO compliance that includes a built-in quality check process. This can be extended to include employee performance and goals as well. Supervisors and employees often dislike the annual review process, as it can focus more on the negative (i.e., the problems and what went wrong). The continuous review gives more room to include the positive side in a production environment, allowing quick refocusing on goals and the actions needed to achieve them. The same approach can be applied to service industries as well.

Does this require an overhaul of current review practices?

Chris Jankus, Paychex HR consultant, suggests using your current process as a foundation to launch and expand into the continuous process. Add documented conversations from manager/supervisor employee meetings on a weekly, monthly, or quarterly basis depending on your company needs. The sales team may already be accustomed to a 30-60-90-day review, so you can extend that same style of review to other areas of the business.

As far as documenting the conversations, do so in a way that suits your culture – just be sure to document the exchange in some way. These more frequent check-in conversations don’t necessarily need to include the "meets expectations/needs improvement" scaling.

What are the potential obstacles or downsides to this approach?

Your employees will likely want to know, "What's in it for me?" The simple answer is this frequency of discussions can open up more opportunities for input and personal development, and promoting a feeling that their performance directly impacts the company’s goals

Change is not always easy. A continuous review process, which is more conversational and less formal, can be especially challenging for managers – and some employees – who may be accustomed to a more formal process. Managers should be mindful of employee feedback and use this to adapt the process, as necessary

How does this impact employees?

A benefit to this style of performance review is that the employee can feel more invested in how their job in particular can impact the company's success. On a larger scale, it can make your company more agile. Your business needs information in real time to respond quickly to necessary change. The ongoing conversation provides feedback which can be relevant and useful today.

Year-end is a good time to assess your review process. Your employees are your most valuable and most expensive asset. Start planning now to get the most out of your team and engage them on a deeper level, so they can feel more like a partner.

This website contains articles posted for informational and educational value. Paychex is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, Paychex. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant.