9. Should I Ditch Annual Performance Reviews?

So what are they supposed to do anyway?

In an ideal situation, an organization would take the objectives from their playbook for the year and trickle them down into annual SMART goals for everyone in the company. These goals are then reviewed annually, along with performance, behaviors, and cultural-acclimation.

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The employee is then given a summary rating and score and will usually then translate to a compensation increase or perhaps one’s ranking in a 9 Box review with upper management.

Being on the front end of these types of programs, I can tell you, it’s flawed. Because managers will then get in a room and decide what they want to give people anyway. I’ve heard everything from, “Well, Susie worked really hard on that one program, so even though she missed her two goals, I’d like to give her 3% anyway. Or she’s been here 20 years so we’ll overlook the fact she didn’t meet the goals.” Or I’ve heard, “we really need to stick to the bell curve, so let’s see how we can adjust the scale so we come out with more of a bell curve.”


Annual performance reviews are also supposed to identify how a goal or objective was met. Of course, how often have you been in a review session where someone (or maybe even you) has said, “oh gosh, I didn’t get to work on that goal because this and this and this came up. Maybe we should change my goal to the stuff I actually had to work on.”

Rarely do performance reviews align goals to the organization that actually led to results that were reported up the chain as moving the dial on a company-wide KPI.

The goals are typically either changed, ignored, or not measured at all. As long as some work went toward it, full credit is given.

These are only a couple of the review errors that happen all the time.

Don’t get me started on all the of the biases that experts warn against. When I used to train on conducting the annual performance reviews, the list of biases to avoid was more extensive than the training for coaching behaviors and performance.

Halo biases, leniency biases, recency bias, severity bias, and proximity errors, are just a few of the errors that could occur.

Cool if you’re the employee, not so cool if you’re the business owner.

So How to Evaluate Performance Instead

To me it feels like an annual performance review is a management-related activity. Leadership on the other hand takes daily or at least regular touch points with your employees.

I am fully an advocate of performance evaluations. There’s way too much evidence out there to support the theory that good employee performance leads to organizational performance. What I am not in favor of is an outdated annual performance review system. So instead of ditching performance evaluations and reviews altogether, consider a monthly or quarterly check in that establish these elements:

1. Goal/Objective/Project Progress

Part of the strategic planning process I use with clients breaks down the annual KPIs into quarterly objectives that drive movement toward meeting them (measured monthly through a variety of metrics). So, each quarter, my CEOs meet with their employees to outline projects that help them meet those objectives. They meet at least monthly, if not more often to address progress and problem solve for any issues that are preventing them from meeting their goals.

New goals, objectives and projects are assigned for the next quarter and adjusted if not enough progress is being made toward the annual goals.

2. Coaching for Support

Take the opportunity once every other week or so to focus 100% on their needs. Ask open ended questions, then sit back and listen. Ask questions like, what’s on your mind? Has anything driven you crazy lately? What did you get excited about? If you could change one thing, what would it be? Is there anyone on the team you’d like to recognize? Is there anything I can do to support you?

3. Coaching for Problem Solving

1:1 meetings are a good way to nip poor performance in the buttocks. If results are not being achieved, you need to address it. And it’s not always a behavior or personal performance issue that needs address.

After the second month of little to no results in a key area, it’s time for some good discussion. Get on a call or meet in person and put it on the table. “We’re not getting the conversions we expected from the project you’re working on. I’ve seen the time and effort you’ve put into it so let’s take a look at what changes we can make to turn these results around. Are you up for a brainstorming session?”

Not only are you building your authority for the project, you are building rapport and relationship with your employee as a partner to problem solving a real issue, directly related to your key result area.

Now who wouldn’t rather spend time doing that than working toward an annual performance review?

4. Coaching for Expectations

When is the last time you reviewed the job description or performance expectations with your employee? Have they ever seen their job descriptions or have you ever communicated your performance expectations to them?

Don’t wait until someone is not meeting your expectations to put the expectations in front of them. As a Human Resources professional, I’ve seen this more times than I’d like to admit.

Take time to review your values with your employee and summarize ways in which they’ve help you and the business stay grounded. Or inform them, “this week I’d like you think about one way you can demonstrate this abc value to our clients. Let’s talk about it in our next 1:1.”

5. Don’t just look backwards

In fact, only spend about 25% of your time looking backwards. Talk instead about moving forward. Ask them how they would like to pursue professional development in the next quarter. Ask if they are content in their position or if they would like to see a few new challenges in the next quarter.

Ask them what exceeding their goals would look like in the next quarter. What trends would they like to set and what ideas do they have that would take the company from marketplace contributor to marketplace influencer and would they like to lead a project to get the company there.

The possibilities are endless.

We have incredible access to our employees like never before. Let’s make the most of the privilege it is to serve them regularly with these simple but highly impactful One on One conversations.

By the way, in case you need a few pointers on initiating some difficult conversations, check out the previous episode, episode 8.

Thank you for listening to this episode of the ONE BURNING QUESTION microcast. Please join me in our private Facebook group Small Business Confidants where we come together to join, share, plan, create, and give.

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