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In today’s competitive business climate, every process involved in the design, sales and production of your product or service should be reviewed to determine if it needs to be left alone, streamlined, or dumped. The decision should be based upon the value of the output created, not the continuation of a valueless input. The importance of reviewing every process includes evaluating the worth of annual performance reviews.

We advise our clients to jettison The Annual Review.

We view The Annual Review as a “we’ve-always-done-them” negative program. In no way does it support business goals. The arbitrary practice of The Annual Review does not add to a worker’s self-respect or empowerment. Instead, it creates bitching and moaning that undercuts motivation. In short, the process undercuts people’s self-worth, causes upset in the departments, and lowers productivity and profitability.

Six Reasons to “Deep Six” The Annual Review

Here are some of the factors that render The Annual Review to be negative:

1. They are usually done late. It tells the worker they are not worth the effort.
2. They are often based on arbitrary criteria. “How was Joan’s attitude?”
3. They are subjective. Managers play favorites.
4. They give feedback that is up to a year late. People get graded on things they don’t remember.
5. They are done in a hurry. Managers let the workers know what a pain “annual reviews” are.
6. They delay the ability to compensate high performers in a timely manner. It de-motivates workers.

We often see the last scenario above. Some workers are doing an extraordinary job in their area of expertise. These people may sit in the same office (and often do) with an employee producing half the results, but are getting the same pay. The productive worker wants to be compensated for the work they produce—and they should be. The company will not give raises until its annual review. It is foolish for the productive worker not to go test the market to see if they can find a job and be paid fairly. They often do. The original employer now has to go out and find someone to try to do the first person’s job and ends up paying the new employee what the star employee wanted. It is a stupid way of running a business.

Treat people based on the value they bring to the company and how they meet their individual goals. The feedback methods and timelines the company uses affects productivity and profitability.

The best way to review workers’ performance is to provide individual feedback that is:

1. Immediate - when either a compliment or a reprimand will be related to a recent action.
2. Tangible – when it is about concrete and specific behavior:
1. Client A just called to tell us how much your visit helped them out.
2. You forgot Step Three in the delivery process; and a number of packages arrived late.
3. Your weekly reports are arriving on time; and that is helping the sales department.
4. Keeping Teams B & C informed of what you are accomplishing weekly has boosted production by 18%.
3. Regularly scheduled - There should be dates set to review work on a regular schedule. Based on the employee and the job, it may be daily, weekly or monthly. Always be measuring and sharing the output of people’s work.

It is important to provide feedback. The Annual Review is an ineffective practice that many companies still practice. Companies often find it hard to jettison The Annual Review because it means changing a system. Find it hard and do it anyways—then, watch the company’s productivity and profitability grow.