Performance reviews: should we just get rid of them?

Few people look forward to their annual performance review. This is not surprising; people prefer not to put their fate in someone else's hands, even though that is often how it feels. And not without reason: several studies have shown that this conversation simply does not work the way it should. It is often renamed "the judgment call" for a reason.

So why are we still having it? Wouldn't it be better to do away with the whole thing?

That too has been tried, but also proves far from ideal. So what is left? And how do you achieve what the annual performance review does not seem to do: ensure better performance, more development and higher motivation?

The annual appraisal interview is proven ineffective

Organizational psychologist Kilian Wawoe of VU University Amsterdam conducted seven years of research among hundreds of managers and employees, and concluded: annual appraisals are demotivating, have no positive effect on performance, and often do not come about fairly. In fact, 30% of employees start performing worse after an appraisal. There are several reasons for this, including:

Conversations are a one-way street

The supervisor speaks. The employee listens. The manager tells what they think: judgments, scores, areas for improvement. The employee needs to hear this and take it with them to "do (even) better next year. Sound familiar?

Such a top-down conversation reinforces feelings of dependency and a power imbalance, which reduces the likelihood that employees will feel heard, engaged or motivated. There is little room for dialogue, reflection or shared meaning-making, and important information and knowledge remains untapped, namely: the employee's perspective. By conducting the conversation in this way, you lose both quality and effectiveness, and conversations yield little. Especially if you want to encourage development, motivation and performance improvement.

Appraisals are too subjective

Employees feel that appraisals are not conducted fairly, and according to Wawoe's research, they turn out to be right. After all, only a small portion of appraisals can be traced to actual performance (21%!). The rest is influenced by other factors such as gender, accent, appearance and degree of friendliness - or just "not being friendly enough. Not exactly fair, right? And certainly not helpful. The review actually says more about the reviewer than it does about the employee, and that is by no means the point.

Too late and too rarely: annual does not work

A big problem with the annual appraisal is already in the term itself. A once-a-year conversation brings its own challenges.

In fact, it happens more than once (let's face it: much more than once) for goals set in December or January to prove outdated after only a few months. For example, because the goals are set too ambitiously, priorities change or things run differently because of dependencies on other teams, goals or projects. But at the end of the year, the employee is still evaluated on these outdated goals - illogical though that may be.

On top of that, an annual conversation almost always creates recency bias: executives weigh the most recent events more heavily than accomplishments from the beginning of the year, because they simply stand out more clearly. Because let's face it: not many people still have in their mind's eye what they were doing 10 months ago, let alone someone else's. This creates a distorted picture based on outdated goals and a selective memory.

So why are we still conducting performance appraisals?

Many organizations have wondered this and tried to do away with annual appraisals altogether ... only to reintroduce them anyway. Abolishing them did not have the desired effect either, because they discovered that too few talks took place, decisions about salary became less transparent and/or that employees continue to need a certain form of recognition and reflection.

So back to the old system, even though it is not ideal. Stick with the annual appraisal, then, because it's better than nothing?

However, there is a third option. An alternative in which interviews do take place and do what they are supposed to do: improve performance, increase motivation and stimulate development.

Do not abolish, but renew

Instead of completely abolishing the annual appraisal interview, the solution lies in transforming the interview cycle. By shifting to a continuous dialogue throughout the year, feedback and development become a natural part of work - rather than a snapshot at the end of the year.

This allows flexible adjustment of goals, keeps performance current and relevant, and creates a realistic and fair assessment.

Moreover, the employee is actively involved: there is room for reflection, mutual feedback and joint agreements. Thus, the conversation does not become a condemnation, but a powerful tool to really improve motivation, commitment and performance.

Make the conversation work for your organization

The annual appraisal conversation often doesn't work as intended, but that doesn't mean we should do away with it entirely. The real power lies in making the conversation continuous. That way, the conversation transforms from a snapshot at the end of the year into a powerful tool that improves performance, stimulates development and boosts motivation, without surprising anyone with outdated judgments or selective memory.