Goodbye annual appraisals, hello continuous performance management

There are days of the year that employees look forward to such as birthdays and Christmas, and some that they dread, like the deadline for submitting their tax assessment. Where does the annual appraisal fit it for your employees?

Performance management processes, like a lot of things in the sector right now, are continuing to change as companies look to become more data-driven and run processes more intelligently. Progressive People Companies are swapping out the annual appraisal for continuous conversations instead. Additionally, older more traditional approaches to performance management mean significantly more paperwork, for already busy and overworked HR and People teams.

For one of our customers, for example, their annual performance review process used to take up to six weeks. Their HR team would prepare paperwork for each month’s upcoming reviews at least two weeks in advance, and then send them to stores. When they arrived, the review needed to be completed by the manager, approved, reviewed with the associate, signed and returned back to the HR team. They would then verify wage increases and enter them manually into their systems and file the paperwork.

The way they typically work, with reviews scheduled once a year, means that the triumphs and disasters of the previous year are stale and half-forgotten by the time it comes to have the appraisal. Why are companies looking backwards at past performance when they should be planning how the employee can excel (and be happier and more fulfilled) in the future?

Little wonder that some companies are ditching the annual performance review entirely – including such corporate giants as Deloitte and Netflix.

Two thirds of employees told us in recent research that being valued and recognized is the most important aspect of their work. So, here are five ways to truly reinvent performance management in today’s changing world of work for the better.

1. Set clear expectations

People need to know what they’re doing so they can work towards a clear set of goals. Employee engagement is best when everyone is on the same page. Employees need to know what’s expected of them – for example what personal goals they are working towards and what timeframe they must accomplish them in. It’s important for employees to understand how what they’re doing contributes towards the overall company strategy and growth.

2. Collaborate

Collaborate with 360 feedback and peer recognition from people who work as a team every day on the ground, incorporating a range of feedback to minimise bias. Make sure that feedback questionnaires are focused on key performance indicators that are directly linked to that employee’s own development goals. It’s important that feedback is a continuous, regular process, with clear actions at every stage – including recognition and rewards for those that achieve their goals.

3. Encourage self-evaluation

Employees shouldn’t be passive about their performance – if they are, then they’re clearly unengaged, and not productive in their roles. Learning is always more powerful when the worker is invested in their own development, which is why organisations should be encouraging employees to undertake their own professional growth, set their own personal goals, and assess their progress. Remember, evaluation works both ways. Performance management is a great opportunity to solicit feedback from employees about what the organisation could be doing better, ensuring you can fix problems before they lead to disengagement, frustration and, ultimately, staff churn.

4. Make feedback continuous and sustainable

Your employees’ triumphs and mistakes do not happen to a schedule, and there’s no reason why feedback should be a fixed date in the calendar. Instead of waiting for someone’s review to praise them for their good work, businesses should adopt channels that allow for continuous and spontaneous feedback. Find channels for continuous feedback that are easy to use, so the feedback process is quick and achievable for busy managers and provides a real-time picture of performance and attainment.

5. Don’t just think – act

It’s all very well setting goals for employees, but if your managers don’t follow through then you might as well not bother with performance reviews at all. That’s why it’s so critical to ensure that every goal within an individual’s development plan has a clear timeline of when each action will be completed. Rather than concentrating on particular skills, you should encourage managers to focus on how each employee can build on their particular strengths and passions, and how their development will help them towards their career aspirations. Managers should ask for updates and encourage progress, making it clear that self-development to enable your employees to progress is a priority for you and the organization.

A new world of performance management?

Whether you’re swapping out the annual performance review, or introducing peer-led recognition, the important thing for employees is that they feel valued, and understand what’s expected of them, and how they’re performing. Not in the least, a better more continuous performance management process means less admin for HR and People teams, so that they can concentrate on those all-important experiences. For example, that one customer who used to spend six weeks and many piles of pape work on annual reviews? Now, managers get alerts of forthcoming performance reviews, can retrieve most things they need electronically, complete the review online with a digital signature-and once evaluation scores are calculated, new pay rates are automatically sent to the payroll system.

Not only are employees happier, more engaged, and clear what’s expected of them and how their performing, the new performance management approach means more invaluable time back for the HR team. What’s not to like about that?

Interested in changing your performance management strategy? We recommend the Re-engineering Performance Management training day.





Paul is a highly experienced HR tech professional with over 30 years in the industry. Before joining Sage in 2017, as CMO for Sage People, he worked for a variety of companies including as VP at Citrix, sales lead at Google and VP at Oracle.