5 Reasons Your Performance Reviews Are Useless and How to Fix Them

Most companies conduct performance reviews so they can help employees perform better — and so the company has a meaningful metric upon which to base continued employment, promotions, and increases in compensation. The problem is that most reviews don’t actually deliver the key information the organization requires. Here are five reasons your reviews are mostly useless (and how to fix them so they work):

Reason #1: They are conducted annually.

These reviews can be time-consuming and paperwork-rich, so once a year seems efficient. But so much happens in the course of a year — by the time review dates roll around, most of it has been forgotten.

How to fix it:

Make every day a review. Instead of major annual reviews, have managers meet with employees at least monthly and provide continuous feedback. Establish a system for managers and employees to track successes and failures so that employees will want to shine year round. Even if you continue annual reviews, these “in-between” meetings will result in a surprise-free evaluation process for everyone.

Reason #2: Your reviews don’t identify top performers. Or bottom ones.

Unfortunately, standard performance appraisals tend to normalize out the top performers, so they’re neither rewarded nor advanced. And when great performers feel undervalued and unappreciated, they move on. Further, poor performers are able to sneak by the system, statistically staying under the radar and bringing down overall organizational effectiveness.

How to fix it:

See the fix for #1. One of the disadvantages of the annual review system is that it’s sometimes the only time employees meet with their managers. Your managers should engage with their team members often enough to know top and poor performers, so formalize more frequent engagement.

Reason #3: You’re measuring the wrong things.

Executives need the big picture. You want to know who’s selling the most or moving the most units, but the big picture doesn’t always tell the right story. Let’s say you have two employees: one who has a few big projects that require little effort to maintain, and one who has many small projects that require a lot of effort to maintain. Employee A, who doesn’t have to try as hard to keep his quotas up, spends work days on social media, playing games, or engaging in other personal activities, while Employee B, who has a strong work ethic, spends all day on the phone, working his accounts, and putting in a ton of effort for the company.

Who would you rather have on your team? Obviously most execs would prefer to have an entire workforce made up of people like Employee B, but because Employee A has higher-profile projects with more impressive numbers, he might look like the stronger performer in a standard performance appraisal.

How to fix it:

Get rid of formal performance appraisals altogether, or at least ditch the standardized formats. At the minimum, provide managers with a place on each review form to add pertinent information that hasn’t been captured elsewhere. Your managers need to be able to tell you that even if Employee A looks good on paper, he’s spending more time on Facebook than on managing his projects.

Reason #4: Reviews are inherently one-way.

Many reviews don’t allow employees to provide feedback on their managers, and even for those that do, most employees don’t think it is taken into account. Their reviews ultimately leave them feeling like children getting report cards.

How to fix it:

Institute a year-round system that engages employees in improving the company, their managers, working conditions, and the entire company culture. Allow your employees to submit anonymous feedback. Sure, you’ll get a few jokesters — and you might even get some angry comments — but if you create an environment where employees feel connected and engaged in creating a stronger corporate culture, you’ll have higher retention rates and happier, more productive workers who want to do a better job because they feel valued and appreciated.

Reason #5: Your managers don’t know what they’re doing.

Often, managers have no idea how to handle performance reviews. What if someone cries or becomes angry after receiving negative feedback? What if an employee is doing okay — but not great — and there’s nothing overt in his or her performance that the manager can pinpoint? And how does one contend with the subjective parts of the review process? Reviews can be stressful enough that many managers are inclined to check off boxes and do the bare minimum to get them over with.

How to fix it:

Create a culture in which your managers and employees know why performance reviews are important and can value the process. You want your managers to honestly review each employee, providing an opportunity for that employee to grow and be rewarded for hard work and good performance … and it shouldn’t just be about filling out paperwork.

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