Are Annual Reviews Obsolete?
December 28, 2017

Are Annual Reviews Obsolete?

 |  By: Mike Opperman

Everyone hates the annual review. There are equal parts apprehension from the employee and dread from the employer. Thankfully for some, a recent Harvard Business Review article says that the annual review may be heading toward obsolescence.

According to the article about 70 percent of multinational companies are moving toward this model, replacing annual reviews with frequent, informal check-ins between managers and employees.

Authors Peter Cappelli and Anna Tavis state the largest reason for the change centers on performance.  “With their heavy emphasis on financial rewards and punishments and their year-end structure,” they say, “[annual reviews] hold people accountable for past behavior at the expense of improving current performance and grooming talent for the future.”

In contrast, the authors say, regular conversations about performance and development change the focus to what your business really needs. The change places greater emphasis on improvement and growth rather than accountability. This emphasis on employee growth is most important in times when the labor supply is scarce—a situation often too familiar to dairy producers.

Cappelli and Tavis see three business reasons to drop the appraisal process:

  1. The return of people development. The process allows for employees to be in charge of their own growth, and is especially useful for those that are motivated by the potential for learning and growth.
  2. The need for agility. Technology in dairy farming continues to evolve. Because of that, you probably don’t want employees to keep doing the same things so there is ample opportunity for ongoing learning. For some companies the conversation has evolved to regularly revisiting two basic questions: What am I doing that I should keep doing? And what am I doing that I should change? Annual goals have been replaced with shorter-term priorities.
  3. The centrality of teamwork. “Moving away from forced ranking and appraisals to a focus on individual accountability makes it easier to foster teamwork,” the authors say.

Companies that have utilized the system still give workers end-of-year assessments, but only to summarize performance discussions that happen throughout the year and to set pay increases. “Employees still have goals, but the goals are short-term.”

Challenges to the new system include difficulty aligning individual and company goals, rewarding performance and identifying poor performers. Regular and more frequent feedback also makes for potentially more documentation, which can be circumvented through oral comments.

“Companies that don’t thank an overhaul makes sense for them should at least carefully consider whether their process is giving them what they need to solve current performance problems and develop future talent,” say the authors.