How Often Should You Conduct Performance Reviews?

Annual performance reviews have been getting a bad rap of late.

A whopping 96% of HR professionals report that they are ineffective. Business leaders say they can do “more harm than good.” And only 14% of employees believe they inspire improved performance, with many finding them stressful, upsetting, and demotivating. Some businesses — including Accenture and GE — have scrapped the annual review altogether in favor of informal, weekly 1-to-1s between managers and employees.

But there’s a reason that nearly 90% of businesses still conduct regular performance reviews. If done well, they are a vital component of a strong talent development program that ensures employees’ overall performance is regularly assessed, encourages managers to check in with their teams, and enables businesses to identify opportunities for employee growth and career development. For many businesses, annual reviews remain a cornerstone of an end-to-end performance management strategy — provided they’re coupled with a culture of continuous feedback.

When deciding how to approach performance management, it is important to consider your unique company culture and strategic HR priorities. In this article, we’ll explore how often you should conduct performance reviews, how to modernize the process, and how to support regular reviews with continuous feedback to create a more rewarding and engaging employee experience.

What Is an Employee Performance Review?

Although the practice of evaluating employee performance against a series of predefined goals has been around since World War II, performance reviews no longer follow the “rank and yank” process popular in the early 2000s. Since Donna Morris pioneered the idea of the “check-in” at Adobe in 2012, performance reviews have become more informal, with a coaching and dialogue component that was noticeably absent from earlier incarnations.

Yet while many companies now include a culture of continuous feedback, the annual performance review is still going strong. In many workplaces, it retains a link to compensation and career progress and is viewed by managers as an opportunity to discuss employee development and salary rates.

How Often Should Employees Get a Performance Review?

To answer this question, we should probably start by disambiguating the term “performance review.”

If the term refers to feedback from managers and peers, the answer is “As often as possible” — after all, employees thrive in an environment of frequent, relevant feedback. In fact, one Gallup survey found that employees who had received "meaningful feedback" in the past week were nearly four times more likely than other employees to be engaged.

However, if the term is used in the context of a more formal sit-down that consider compensation, promotion, and other long-term assessments, the answer is different.

Maria Balmaseda, a management consultant and former HR manager for Publicis, believes that a formal annual performance review is still “the best method for evaluating your workforce, whether you’re diagnosing performance issues, planning your recruitment strategy, or identifying opportunities for promotions.” According to Balmaseda, the formal appraisal is the ideal opportunity to “evaluate your employees’ future in the company, their level of motivation, and, above all, if they need a change of role or department, or indeed a promotion, in order to keep growing.” Because a performance review of this scale is more time-consuming, it may only be realistic once or twice a year.

So, the short answer to the question of how often performance reviews should occur is “It depends.” Ultimately, though, review frequency is beside the point — the more important question is how businesses can make the review process effective and helpful rather than stressful and tedious.

How to Make Performance Reviews More Effective

Whether you maintain an annual performance cycle or hold two or more performance reviews per year, your top priority must be to justify the time and expense involved.

Research by Gartner found that employees and managers were in agreement over their current performance reviews taking too much effort and not being useful enough. However, while many of the companies in Gartner’s report had focused on reducing stress by decreasing the amount of manager and employee effort involved, these attempts backfired. Not only did employees feel the overall experience was 10% less useful, but performance actually decreased by 16%.

In contrast, when the focus was placed on making the performance review process more useful, companies noted substantial improvements — namely, a 14% increase in employee engagement, a 24% improvement in performance, and a 50% increase in the number of employees who felt the process was fair and accurate.

So, how can you make performance reviews more useful?

1) Align Closely with Business Goals

One of the most effective ways to increase employee engagement is to ensure that employees see how their performance contributes to overall business success.

With a comprehensive performance management system like SumTotal, you can set up a hierarchy of cascading goals that clearly shows how overall organizational objectives dictate team goals and individual performance metrics. As a result, employees see their contributions clearly and feel like valued members of the organization.

Align closely with business goals

For more guidance on how technology can help you deliver valuable and timely employee feedback, watch our on-demand webinar, Rethinking Reviews: How Technology Can Modernize Your Performance Management.

2) Address Biases

For many employees, manager bias is one of the most frustrating aspects of the performance management process.

According to research by the Brandon Hall Group, just 1 in 3 employees feel their manager objectively rates performance, and fewer than 1 in 5 believe their manager gives an unbiased appraisal of their potential. Even the most even-handed manager is liable to fall into cognitive traps such as recency bias (basing performance appraisals on the most recent events rather than a historical average) or similarity bias (rating employees who closely resemble the manager more highly than those who differ).

That said, a formal, structured performance management process can be an excellent way to correct systemic biases — provided the right measures are in place.

For example, researchers at Stanford University found that informal “check-ins” used without an accompanying formal performance management system could enable manager bias, noting that female employees were more likely to receive vague feedback and gendered commentary than males. “The lack of structure led to very different reviews that tended to advantage men [by] describing them in ways that align with leadership and providing them the coaching they need to advance while offering women less praise and less actionable guidance to work with,” the researchers observed.

The same study found that while the commonly used “open-box” format could encourage manager bias, a format that encouraged specificity and evidence-based decision-making corrected this issue, and the resulting performance management system was far fairer than an informal check-in system alone.

3) Focus on the Future… with a Positive Attitude

Manager positivity is key to creating a performance management system that encourages employee engagement. According to the Society for Human Resource Management (SHRM), two-thirds of employees describe themselves as highly engaged when their manager focuses on their strengths, while only 1 in 3 remain engaged if the manager focuses on their weaknesses.

Although the word “review” implies looking back at the past, it’s important that managers make room to discuss employees’ futures as well — and the fact that only 19% of appraisal ratings address the future signifies a missed opportunity. For performance reviews to contribute to business performance, they must help employees improve and grow. With this in mind, performance improvement plans should not be reserved for underperformers, as even top performers will benefit from having a clear development path that reflects their potential, supports their growth, and offers positive reinforcement.

How to Implement a Culture of Continuous Feedback

While modernizing your performance appraisal process is key to creating an engaging company culture, it’s not enough — research shows that more than 90% of employees want real-time feedback that will enable them to respond to changing business needs with more agility and make swifter progress. To create an effective performance management system for today’s workforce, HR leaders must couple performance reviews with a culture of continuous feedback. In addition to maximizing the relevance and value of manager insight, ongoing feedback also reduces any stress that could be triggered by the annual performance review.

To implement continuous feedback, start by:

1) Getting the Most From Manager-Employee 1-to-1s

In addition to holding annual or biannual performance reviews, businesses should harness weekly manager-employee check-ins as an opportunity for ongoing feedback, goal setting, and coaching. CLO Heidi Scott suggests that employees be asked to assess their own progress during these meetings, while managers offer relevant feedback and recognition of recent achievements.

“I’ve found that inquiring about each employee's thoughts around their most significant contributions in the prior week, or whatever time frame it has been since we last spoke, is very helpful,” noted Scott. “It allows me the opportunity to see areas in which they shine that I may have otherwise missed. It also provides us a small way to celebrate how each of us helps move the team toward our goals and company objectives.”

Getting the Most From Manager-Employee 1-to-1s

2) Making Feedback a Two-Way Street

Of course, a feedback culture is about more than employees receiving manager feedback — continuous feedback should provide a full 360-degree view of performance, with employees also giving feedback to one another and to their managers.

Victoria Hedley, SVP of operations at Voxpopme, characterized performance feedback as a two-way street. “Every week, team members give an update, offer feedback, and review the past week,” she explained. “Managers and employees discuss performance, barriers that hinder performance, and other issues in their regular one-on-one meetings.”

2) Harnessing Digital Technology to Make Feedback easy

To build a more comprehensive review system, you’ll need to use digital technologies that make it easy to provide consistent feedback, collect and aggregate data from different sources, and enable managers and employees to see growth and improvement.

A modern performance management platform will allow you to create flexible performance programs, tie your manager-employee 1-to-1s to your performance review system, use performance data to make better decisions about compensation, and offer employees and managers a 360-degree view of their performance and development.

Performance reviews and continuous feedback don’t have to be an either/or proposition.

For some organizations, the annual performance review is dead. For those that prefer to retain it, the focus needs to be on maximizing usefulness and minimizing stress for managers and employees alike. This can be accomplished by implementing a continuous feedback culture, aligning employee performance to business outcomes, and streamlining manager-employee check-ins to drive employee engagement and retention.

To find out how SumTotal could help your organization set the bar for performance, request a demo.