If you’ve hung around here for a while, you know that we’re big fans of giving feedback regularly to employees. We love the idea of informal check-ins, coaching in the moment, high fives for a job well done, and even just more frequent performance reviews.
With all this informal feedback flying around, it’s easy to see how the annual review could get lost in the shuffle. However, there is certainly a business case for why it remains an important component in the small business world. Below, we outline the most important benefits of the formal review.
- It creates a lasting record: Providing feedback in the moment is important in terms of recognizing the good or helping to change the bad. However, this informal feedback is rarely recorded, and it becomes difficult to accurately determine when someone is nailing their role or falling severely short. By creating a less frequent but more detailed record of performance, you create a paper trail that can be used to determine promotions or defend discipline.
- It’s generally more informed: Semi-regular check-ins are good in that they provide feedback in the moment, but they generally don’t capture as many points or go into nearly as much detail as a yearly review (which is probably why managers tend to grumble about them – they can take forever!) An annual review is also an excellent opportunity to roll out the concept of the 360-review, whereby employees are reviewed by not only their supervisors, but also those that they work with and those under them (if applicable) so that they get a more complete view of their performance and where they need to improve.
- It can form the basis of salary increases/promotions: As we touched on above, the annual review is just that, a review of performance over the past year. Based on this collective, birds-eye view of the performance – as opposed to piecemeal bits of feedback gathered from all over – you will feel better informed to make decisions about salary increases and even potential promotions and these formal documents outlining performance against metrics of the job will stand up in court should they ever be questioned by a disgruntled employee.
- It’s a chance to hear back: One of the ways that the annual review differs from other types of performance evaluation is that there is a clear time in the review – and even on the review form itself – for the employee themselves to reflect on how they feel they are doing. In getting to hear their feedback, reviewers can best understand how employees perceive their role and their performance in it.
- It serves as a goal-setting conversation: When you have an annual performance review, you can use it as an opportunity to establish short-term and long-term goals and track progress towards said goals over the long-term. This once-yearly goal setting meeting can prove motivating to both new employees looking to climb the corporate ladder and those that have been in the company for many years and may be feeling like they’ve reached the limit in their current roles.
Now, that’s not to say the system isn’t without its flaws…
- It’s a lot of work: Filling out a comprehensive review that accurately captures an individual’s performance over the last year is a tedious process – not to mention holding a meeting to go over said review and discuss it in more detail. But if you’re a manager with several folks underneath you, it can become a major undertaking. On the plus side, it only happens once a year, but prepare yourself to hear some serious grumbling from your staff!
- It doesn’t always capture the full year: Again, with the review happening just once a year, it’s tough to remember what happened in April if you’re writing it the following January (and again, especially rough for those that manage in multiples!) With the best of intentions, we’d suggest that reviews be created on an ongoing basis, but we know that that isn’t always feasible and means that the performance review might far from capture a whole year’s worth of work.
- Setting goals only once a year might limit productivity: What’s an employee to do if they achieve their “annual” goal mere weeks after setting it? While it would seem obvious that they simply move the meter marker, studies suggest that it can also result in complacency or even a bit of listlessness in their role.
- Too slow-paced for fast-moving businesses: These days, folks change roles and responsibilities more frequently than ever as the companies that they work for evolve to fit the needs of their customers. With this in mind, it’s sometimes difficult for employees to get a review written by the same manager and even for the same role!
Essentially, we think the takeaway here is that the annual review has a place in business, but it should be just one tool in the armamentarium of feedback modalities. If you think your performance review process needs an overhaul, give Abel HR a call at 800.400.1968 and we’ll be sure to walk you through the various options and help you design a review process that works best for your company, your employees, and you.
