Despite the prevalence of annual performance reviews at major companies and small businesses alike, many management teams are still unsure as to how to effectively leverage an employee’s review to produce positive – and ideally, productive – results. As a result the annual performance review is often seen as a worthless, time-wasting function.

The problem however isn’t the review itself but the lack of effective and ongoing feedback. Giving and receiving feedback once a year just doesn’t work. The lack of consequential feedback can often undermine the effectiveness of a performance appraisal. For example, a landmark study on annual performance reviews published by the Harvard Business Review showed that employees often viewed any criticisms as disingenuous; instead, they believed that any negative feedback was an excuse to justify an employee’s request for a raise.

A Towers Watson study reinforced this conclusion.  After evaluating the responses from thousands of workers in a broad spectrum of industries, “The Shape of the Emerging Deal” report identified that:

  • Only 38 percent of employees think their leaders have a sincere interest in their well-being.
  • Just 47 percent think their leaders are trustworthy.
  • Only 42 percent think their leaders inspire and engage them.
  • Only 53 percent think their managers have time for their employees.
  • 61 percent question how well managers deal with poor performers.

With such a diversity of employee and manager perceptions and biases toward managing performance better, a blindingly obvious question rises to the top:  why isn’t management addressing these issues head on?

While there’s no simple answer to these questions, Peter Garber, human resource consultant and author of “Giving and Receiving Performance Feedback”, argues that it’s not the answer that matters so much as the attention that these questions give to the issues surrounding performance appraisals .“The concept of increasing or decreasing the leverage associated with performance feedback needs to be decided by each organization, taking into full consideration the culture, norms, practices, expectations and goals that exist,” Garber writes.  “Keep in mind that these factors will have a significant influence on the perspective of how everyone sees performance feedback in your organization.”

The keyword here is perspective: employee and organizational goals for annual performance reviews are just as subjective as the people presenting them.  For example, an employee might position herself to use her yearly review as an opportunity to discuss a promotion, while her manager might be keen to highlight missed targets.  The result, as you can imagine, is discord.

So what’s a practical solution for the annual feedback conundrum?

While yearly performance appraisals must still be part-and-parcel of your organization’s make-up, studies such as the one above show that once a year feedback isn’t effective. Alternative solutions such as short-term review sessions and more informal discussions can help align an employee’s goals and targets with that of the organization.  In this light, the annual performance review becomes a summary of past performance and a launching point for improvement and coaching. The need to leverage consequences after annual performance reviews is diminished, and employees and managers are often checking to see if they’re on the right track together.