Will the Great Resignation Signal an End to the Annual Performance Evaluations?

By Kevin Cleys and Katie Towery

We are all familiar with the annual performance evaluation process. It has long been the standard across various industries and with employers of all shapes and sizes. However, in 2021, on the heels of what has been deemed the “Great Resignation,” when retention of talent is increasingly difficult for employers, is it time to rethink the approach?

Those who have been in the workforce for some time are certainly familiar with the typical process. Once a year, or perhaps every 6 months, employees are provided with a written evaluation of their job performance during the preceding review period. In most cases, the employer provides a review using standardized forms, and the employee participates in the process—employee receives the performance evaluation from their direct and/or next-level supervisor, employee reviews the evaluation, and employee meets with their evaluators for one-on-one feedback regarding the comments and suggestions for improvement. Sometimes, the employee is afforded the opportunity to “self-evaluate” before or after receiving the evaluation. Importantly, the performance evaluation process can be tied to compensation adjustments, including performance bonuses and raises.

Ideally, there is an undeniable objectivity to this customary approach, utilizing standardized forms and following a standardized process, which many employers like because it can mitigate the risk of claims by employees of disparate treatment. Further, because this approach typically occurs on predetermined dates, the employer can schedule the evaluation process for “slow” periods during the year when it will have a more limited impact on productivity. Finally, the intended impartial nature of the approach makes it more manageable for larger employers and provides a (relatively) objective metric for determining employee compensation.

However, the annual performance evaluation is not without its drawbacks, many of which have come to the forefront in the context of a remote workplace. First, the annual nature of the evaluation process often suffers from recency bias – i.e., the evaluator’s comments tend to focus on the employee’s recent performance, rather than their performance over the entire period. This can lead to skewed evaluations that are not, in fact, reflective of the employee’s overall contributions to the company. Relatedly, if management waits until days before the deadline to complete evaluations, and then rushes the process, this can lead to cookie cutter assessments that are of little use and, worst case, can set the company up for problems down the road (i.e., bad performers with “acceptable” reviews). 

Furthermore, annual performance evaluations tend to negatively impact employee morale. This is particularly true if the employee does not have a strong relationship with, and therefore a lack of confidence in, their evaluator—which, due to the transition to teleworking and corresponding decrease of face time with supervisors, has increased in the past 18 months. Relatedly, if evaluations are only provided once a year, and thus take place weeks or months after certain events have transpired, the comments can be interpreted as judgmental rather than constructive attempts to coach the employee on how to improve performance. Similarly, if an evaluation is only provided annually, it can be viewed as a grading mechanism, as opposed to an opportunity for improvement.  

During the current once-in-a-generation recalibration of the workplace, and with changing expectations for the employer-employee dynamic, the potential drawbacks of annual performance evaluations, and in particular the detrimental effect on employee morale, make it abundantly clear that employers may wish to consider reevaluating their approach to performance evaluations.  So how can employers constructively assess their employees’ performance in a manner that could aid in increasing retention, while also incentivizing employees to stay engaged in the workplace?

Building a New Process 

Before rolling out a new performance review process, employers should keep a few key points in mind.  First, the new approach needs to be clearly communicated to employees.  They shouldn’t be left guessing what the new program’s objectives are, or how they will be assessed under the revised structure.  

Second, let employees know that the fresh approach is being implemented to better serve the company’s values.  By tying performance reviews to principles such as collaboration, teamwork, and growth factors, employers will provide employees with a sharper understanding of how their performance will be measured long term, what the overall ambitions are for the organization, and, perhaps most importantly, how the two are linked.

Make it More Conversational, and Less Like a Report Card

Employees in today’s market desire a collaborative workplace, where they feel that their opinions and contributions are valued.  In order to foster a collaborative culture, employers can shift to a more conversational-based approach to performance evaluations.  

By having assessments be in the form of regular “check ins” that occur on a bi-weekly, monthly, or quarterly basis, employees are given a more frequent opportunity to re-engage their focus on specified goals. This new process should also be a welcome tool for managers, as they can stay abreast of achievements of their team in real time, as opposed to only thinking about how an employee is performing once a year.  

“Check ins” can serve as more of a forum to discuss what is working for both management and the employee.  Find out what the employee’s ambitions are, what they care about, and the projects they’ve worked on recently that they’re passionate about.  If the focus shifts from grading employees based on standardized metrics on a company report card to providing employees with the tools they need for their own development, employee engagement will increase.  As employees are given an opportunity to play a part in shaping their trajectory at the company, they will feel more invested in their work.      

When employees are given the chance to articulate their strengths and discuss how best to address their weaknesses in constructive conversations with management, their drive for improving their work product and performance is much more likely than through a traditional, annual performance evaluation.    

Focus on the Future, Not the Past 

Instead of focusing evaluations on employees’ past conduct, refocus the conversation on ways employees can grow personally and professionally in the future.  By being proactive, as opposed to reactive, conversations with employees are certain to become more fruitful and productive.     

In having regular “check ins” with their team, management should tie conversations back to the company’s overarching values.  Employees’ performance should be appraised on how their work can contribute to and serve those values.  Who doesn’t want to be part of a team, aiming to achieve a defined goal?  If employees are focused on chief objectives that drive their personal intentions for improvement, the future of the organization will be stronger for it.   

Become Coaches, Rather Than Evaluators

In order to give feedback in a constructive and actionable manner, managers need to view themselves as coaches, rather than evaluators.  Through more frequent “check ins,” managers can offer course-correcting guidance that employees can immediately implement in accomplishing their day-to-day tasks.  

Coaches, much like players, aim to do everything within their power to score the next goal and, ultimately, to win the game.  By coaching employees on how to succeed at the company and in their professional careers, managers will be able to develop more trust and a stronger bond with the employees they oversee.  

“Real time” feedback is the key to success here.  By having frequent, constructive conversations with team members, managers can join forces with employees to solve the problems they face, adjust goals as necessary, and refresh the group’s focus on the objectives at hand.

Furthermore, by removing “anonymous” forms of feedback that are commonplace in annual performance evaluations, employees are given the transparency they so desire and, in today’s market, demand from their employers.  Management should be honest, direct, and specific with employees about their work product and expectations for improvement moving forward.  Don’t hide behind the eight ball any longer—be upfront with your workforce about areas of improvement.        

Anyone who’s had to give feedback to co-workers before knows how challenging this task may be.  Walking the fine line between productive and insulting can be difficult to achieve.  Thus, employers also need to put a stronger focus on training managers on how to be well-prepared for the new process.  For managers to lead their teams effectively, they need to be trained in this skill set.  It goes without saying—the more equipped a coach, the more successful their players will be.   

The End Reward

By reevaluating their performance evaluation process and engaging in the challenge of revamping how they review employees, the end reward for employers could be significant.  

If employees see that management is putting in the hard work to develop them professionally, and to ensure that they have the tools to succeed in their careers, then employees will be incentivized to stay with the company and diligently pursue the goals that are placed before them.  By having a workforce that’s committed to the overall success of the team, companies will benefit from a more productive staff.  Through higher employee engagement comes improved performance.    

When the team is successful, the morale of its players is boosted.  As the Great Resignation has taught us, a happier workforce leads to better retention in the long run, and employers’ initial investment in overhauling their evaluation process will surely pay dividends.