Ask any manager what he or she just hates to do and very likely you’ll hear “performance reviews.”

The traditional once-a-year performance review (if employees are lucky to get that), are not only dreaded but ineffective too. Studies consistently show that nearly every employee receives ratings higher than their actual performance – the “halo” effect. Supervisors have motives – although not always in the best interest of the organization – to boost ratings.

These may include:

1. A belief that a higher rating might encourage the employee to perform better next time.
2. The employee has had a lot of personal problems during the last review period. He feels sorry for him and chooses to postpone dealing with the performance issues until a later time. 
3. The department already has a number of vacancies. The supervisor doesn’t want the employee to get angry and quit. As a result, the employee receives a “halo” to keep him/her happy.

Another problem with the once a year employee appraisal is turnover – both managers and employees. Unlike the past when employees enjoyed a career with the same company for decades and managers were organically promoted over time, employees today are mobile and managers are reassigned, promoted or terminated. More often than not, managers don’t work with the same employees long enough to get to know them and subsequently don’t have the knowledge or motivation to give fair performance appraisals.

The result is that mediocre, even poor, performance is tolerated and superior performance is ignored. Every employee then feels entitled to a pay raise and promotion as a reward for good performance.

A better alternative to the annual review is called multi-rater feedback, or 360 degree feedback. It is experiencing a comeback. Multi-rater assessment has been around for decades but the late 1980s and 1990s saw an increase in popularity for these programs, simultaneous with the U.S. productivity boom. Then interest waned during the dot-com boom and for a few years afterward.

But skilled labor shortages and increasing productivity demands have put a lot of pressure on managers to find more effective feedback processes. 360 multi-rater feedback is just one such way.