Money Matters

End of the annual performance appraisal?

I’ve yet to meet anyone who enjoys the annual employee review process—either reviewer or reviewee. So why do we put ourselves through this yearly ritual. Some companies are electing to opt-out of the annual appraisal, considering it an archaic and ineffective employee evaluation process.

Rob Baker, of the VeraSage Institute, is one proponent for doing away with annual performance reviews. “It’s like trying to diet just on your birthday and wondering why you’re not losing weight,” he says. “More and more companies are realizing this (the annual review) is an enormous waste of resources that actually doesn’t improve future performance.”

Don’t misunderstand, evaluating employee performance is still one of the most critical components of running a successful company. Unfortunately, too many companies fall into the one-and-done mentality, where the annual appraisal is the only time workers hear about their performance. Today employees—especially millennials—want more regular feedback.

A recent Trinet Perform study conducted by Wakefield Research found that 74% of millennials surveyed feel “in the dark” about how their managers and peers think they’re performing at work. Nearly nine out of 10 young workers surveyed said they would feel more confident in their current position if they could have more frequent performance conversations with their manager.

Retaining top talent is a main reason companies are rethinking their evaluation process. A recent article on CMS wire describes how several top companies have abandoned once-a-year evaluations for more continuous feedback methods. Plus, those more frequent touch base meetings aren’t just one-way.  “A vital result of the performance management process is that it creates a transparent relationship between manager and employee,” says the article’s author Steffen Maier. “It gives everyone inside a company opportunity to speak up, enhancing the communication process.”

Developing and retaining the best talent these days is all about having a continuous conversation that motivates and engages employees. How do you evaluate your team? Especially now, when keeping qualified workers is more important than ever, it may be time to revisit the way you handle their performance appraisals.