Megan Dwyer
What’s to lose in tossing out the annual performance appraisal?

Momentum seems to be gathering to completely abandon the annual review with the press now reporting regularly on organisations that have loudly said they are dropping the whole thing. BUT, before making that big decision, shouldn’t the question be what is lost by dropping it altogether?


While it is currently sexy to bag the annual performance review, their purpose is still valid. Originally, the performance review aimed to meet the needs of two stakeholders – the individual employee and the organisation as a collective.


The individual employee need is that:


  • I know what the organisation expects of me and how well I am delivering on those expectations
  • I feel valued & listened to
  • I can see opportunities for career progression and support for development.

The need for the collective organisation is:


  • We have made clear what is expected of each employee
  • We know who has contributed to achieving the business goals, and how
  • We know who needs more support and development
  • We know who has the potential to progress internally into different roles

However, in practice the annual review for many seems to have become more about form filling and the organisation deciding how to allocate remuneration dollars equitably using a hotly contested rating system.


In my view best practice means that:


  • each employee feels valued and supported by their manager and the organisation, and
  • everyone is engaged with the organisation’s strategic goals and understands the role they play in achieving them.

This is best achieved by regular two-way feedback with their manager about how they are travelling, any development needs they may have or career aspirations that should be discussed/actioned; or any changes in expectations about outcomes they are delivering.


What’s important is making sure that your managers know how to manage people – to give feedback, identify development needs, look out for opportunities for their employees to be involved in career progression activities, regularly setting clear expectations and meeting with them individually to manage their performance against those expectations.


Individual employees should be encouraged to keep their own notes about what they require, be it more guidance, more challenge, less interference from above – and managers should listen to this feedback at least monthly, with action following where needed.


For the organisation, best practice also means being able to make fair remuneration decisions that reward effort/experience/contribution.


The  form, process, and system used to collate the data annually are all incidental to the performance and development review.  


If the process is driving your Executive team to question the effort reward equation, it may be time to get back to basics. Think about how much time is spent in managing the process versus how much time your managers spend in actually managing your people and this might give some insight about what needs to change.


For the organisation, remuneration decisions are complex and need to take account of external and internal benchmarks, as well as capacity to pay. But ultimately no matter how scientific we try and make the process, in the end individual judgement must be applied. If CEOs and HRDs are comfortable giving managers the responsibility to make decisions about who they hire and fire, then it may be time to give managers responsibility for how they distribute the remuneration in their teams. Equip them to manage people well, trust them to apply sensible judgement, and authorise them to make fair and equitable decisions based on the remuneration benchmarking data available.


If they aren’t capable of doing this fairly and equitably then maybe they need more support and development to equip them to be better people managers.


If the performance appraisal system isn’t working, it is time to understand what is broken in the system – before throwing it away altogether.  The actual rating scale, form and process of reviewing will cease to be contentious if managers manage people well.


So, the effort and dollars should be directed away from automating the process or redesigning the form and rating scale, to investing in increasing line manager capability to manage people.