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Significant amounts of time and energy are spent on annual performance reviews, but they should not be relied upon as the key way to measure employee effectiveness.
This is according to a survey of 2,151 workers by Korn Ferry in which 87% said they have an annual performance review with their boss and nearly a third (29%) said they spend seven or more hours preparing for the review.
However, 96% said real-time feedback and ongoing performance discussions with their bosses are more effective than an annual review, and 46% said that the goals they set in their reviews are no longer applicable a year later when they sit down to measure performance.
“Organizations realize that managing business performance is a very dynamic process, so having a once-per-year meeting that hopes to both evaluate and improve performance is a tall ask,” said Korn Ferry Senior Client Partner Katie Lemaire. “It is still critical that employees receive regular feedback to understand how they can continually improve.”
Nearly a third (30%) of respondents say annual reviews have no impact or a negative impact on their performance and 43% said reviews had no impact or were unhelpful at helping them understand what to do more of or differently to improve future performance.
While respondents indicate they prefer ongoing feedback to annual reviews alone, they did offer some positive thoughts on portions of the annual review process. 92% said 360 feedback from bosses, colleagues, direct reports and clients is useful, with 48% saying 360 reviews are extremely useful.
More than two-thirds (68%) said they look forward to their annual reviews, and 71% said it is fair to base annual compensation increases on the result of the annual review.
“When approached effectively, an annual review can be a positive tool in helping increase performance, but it shouldn’t be the only way success is measured,” Lemaire said. “Regular feedback can help employees course correct in real time and can help them adjust as business needs change.”