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Are Your Employee Performance Reviews Effective?

Posted by: on November 13, 2018 in employee relations Human Resources


Annual Reviews vs Continuous Feedback: Which is the Best Fit?

Are Your Employee Performance Reviews Effective?The end of the fiscal year is nearing, and for many companies that means annual employee performance reviews are nearing. Some critics argue that annual performance reviews and even semi-annual or quarterly reviews are archaic and not as effective as employers would like to believe. Employers believe that annual reviews help improve employee performance, but more recent research has found that this approach is not as effective as previously believed.

Employers can choose to ditch reviews altogether, but some type of performance record is required to measure and monitor employees and stay compliant with employment laws. Often, employee records are used in an employer’s defense in an Equal Employment Opportunity Commission (EEOC) case, most often in wrongful termination claims.

An alternative employee performance management option to consider is continuous performance feedback. Continuous performance feedback is a performance management process that takes place throughout the entire year on an ongoing basis rather than creating a single annual report. Let’s explore some of the qualities of these two very different employee performance management approaches.

Frequency

Annual performance reviews are performed once a year of course, and it can be difficult to summarize an employee’s accomplishments and areas of improvement over an entire year’s time. This can be especially frustrating for employees who felt they had a great year overall, but may have had a bad month at some point or some challenges closer to the end of the year. Some employers may even have a similar approach to performance reviews but have them done more frequently - semi-yearly or quarterly are also common. Regardless, this approach is still typically prone to something called recency bias. Recency bias, by definition, is the phenomenon of being able to more easily remember something that has happened recently, compared to remembering something that may have occurred months prior and it is a common feature of annual performance reviews.

On the contrary, continuous performance feedback is about as frequent as an employee management approach can get. One key component of this approach is frequent check-ins, or brief one-on-one meetings between an employee their manager where they can discuss progress and development, organize priorities, address any issues or concerns and add any new objectives. These check-ins typically take place monthly or bi-monthly, allowing the manager to more easily recall their employees’ accomplishments and areas of improvement over that time period. Another important component of this approach is having managers provide real-time feedback to their employees. This allows them to help reinforce positive behaviors, encourage progress, and correct unwanted behaviors in the moment.

Cost

Conducting annual performance reviews requires quite a bit more in resources than employers sometimes realize. A thoroughly-conducted review takes a lot of time and effort to orchestrate, which comes at a significant cost to the employer in both payroll time and lost productivity. Some of the components to be considered in the cost of annual reviews are:
  • Manager’s hourly wage
  • Manager time spent on writing and coordinating one employee review (two to three hours on average)
  • Manager time spent in one formal review meeting with an employee (one hour on average)
  • Average hourly wage of employees being reviewed
  • Employee time spent in one formal review meeting with their manager (one hour on average)
  • The number of employees a manager is expected to review
In an example scenario, a manager makes $60 an hour and has 12 employees making an average of $35 per hour. If the manager spent two hours coordinating each review and one hour in each formal meeting it would all up to 36 hours - nearly an entire week of work and a total of $2,160 in wages. In addition, the 12 employee hours spent in formal review meetings would cost the company another $420 in wages.

If that example manager switched to a continuous performance feedback approach, daily feedback between the manager and employees would take a negligible amount of productive time. Brief monthly check-in meetings with 12 employees, which should take no more than 20 minutes per employee, would add up to 4 hours on performance management per month - not even an entire work day. However, this approach can get costly when these meetings run too long or get too frequent. When taking a continuous performance feedback approach, it’s important to focus more on the in-the-moment feedback and have the check-in meetings be done only on an as-needed basis.

Employee Fallout

It’s no secret that employees generally do not look forward to their annual performance reviews. They are a commonly dreaded event for most employees, regardless of industry. While employers and managers perform annual reviews with the belief that the feedback their employees receive is constructive and provides them with invaluable insight that they can use to improve their performance, that is not typically how they are actually received. Because negative employee performance is more commonly documented throughout the year, annual reviews are subject to being more negatively-focused. This can further discourage employees and have the exact opposite effect of what was intended.

Continuous feedback, on the other hand, is useful for pointing out both the positives and the negatives of performance in real time. Employees tend to feel more balanced and are more likely to improve their performance in the moment. However, as with any approach, too much feedback can be negative as well. Employers should take care to ensure their managers aren’t micromanaging employees and making them anxious when providing continuous feedback.

Effective employee feedback can be achieved in a variety of ways, each having its own benefits and drawbacks. Employers can consult with their HR provider to examine their current approach and weigh the pros and cons before deciding if a different approach may be a better fit.

Emplicity understands that HR Outsourcing should be simple and meaningful. As a Professional Employer Organization (PEO), we strive to be a great partner in supporting your business. If you would like to request more information on how we can assist your needs, please reach out to us at 877-476-2339. We are located in California – Orange County, Los Angeles, and the greater Sacramento and San Francisco area.

NOTICE: Emplicity provides HR advice and recommendations. Information provided by Emplicity is not intended as a substitute for employment law counsel. At no time will Emplicity have the authority or right to make decisions on behalf of their clients.