- Most large companies require employees to participate in annual reviews that are largely outdated, time-consuming, and ineffective.
- Many small businesses also require some type of reporting or formal evaluation process.
- The Great Resignation is changing attitudes about the traditional annual review process with many companies adopting a more frequent and informal feedback process that they feel is more effective.
It’s that time of year again.
Besides the happily anticipated end-of-year holidays, there is also the (sometimes dreaded) employee annual review.
An employee performance review is a formal assessment in which a manager evaluates an employee’s work performance, identifies strengths and weaknesses, offers feedback, and sets goals for future performance.
When done right, the annual performance reviews can help workers understand what they’re doing well, how they can improve, how their work aligns with larger company goals, as well as what is expected of them.
In a light of the current era of zoom meetings and work-from-home life adjustments, companies’ traditional methods of observing employees’ performance has been upended, and their evaluation process has seen many pandemic-era challenges.
How has the standard corporate annual employee review changed, if at all, in recent years?
The number of companies conducting annual or semiannual reviews has fallen in recent years.
According to a 2019 study from Gallup, only about 10% of U.S. workers felt engaged after receiving negative feedback on the job. And nearly 30% were so put off by a negative review that they began actively looking for a new job.
55% of workers believe annual reviews don’t improve their performance, according to a 2019 Workhuman Analytics & Research study.
“The traditional performance-management approach has become outdated,” said Rosette Cataldo, vice president of performance and talent strategy at Workhuman.
One potential pandemic upside is that performance reviews are getting simpler. Some companies have opted to provide continuous, real-time feedback throughout the year.
The Great Resignation has also forced more companies to reevaluate their performance reviews, and the shift has accelerated a trend toward more frequent feedback and greater focus on career development.
According to a survey of 317 employers by McKinsey & Co. and LeanIn.org, about 30% of companies said they adjusted their performance evaluations to account for challenges created by the coronavirus and 5% had put reviews on hold or canceled them.
A survey by Aon of 1,330 human resources officials found that 47% had made changes to their employees’ performance goals or were considering them.
The standard corporate annual employee review has changed drastically since the pandemic, mostly because the nature of remote work forces more scheduled check-ins between bosses and employees.
Are annual employee reviews effective?
Many professionals do not look forward to annual performance reviews. For employees, cataloging the past year’s achievements and struggles can be time-consuming, and if minimal feedback is received, the process can seem pointless and unhelpful.
Employers may struggle to frame constructive criticism or help employees set goals for the year ahead.
A SHRM study found that as many as 72% of companies still conduct yearly reviews even though 87% of both managers and employees find them ineffective.
According to Gallup, only 14% of workers strongly agree their performance reviews inspire them to improve.
But if implemented with mutual honesty and with the goal to create actual change, annual reviews can become valuable tools for managers and team members.
“Feedback is no longer about the organization simply talking at the employee. It’s becoming a two-way street where individuals are able to bring feedback to the organization,” according to Kyle Brost, chief executive officer at Spark Policy Institute.
The benefits related to frequent feedback, goal setting, and growth opportunities far outweigh the value of an annual review.
What approach do corporations and large companies take to annual performance reviews?
Performance reviews give employees and managers a chance to discuss how employees are doing and how they can do better, together.
Done right, they can engage and motivate employees to maximize and align their efforts. Done wrong, they can send employees down a disengagement spiral and even decrease performance.
Currently many, if not most larger companies – conduct once a year performance reviews of all of their employees.
It costs organizations a lot of money to conduct performance reviews, as much as $2.4 million to $35 million a year in lost working hours for an organization of 10,000 employees, actually.
Companies like Adobe, General Electric, and Cigna have ousted the annual review process in favor of frequent, individualized feedback. This was intended to create a greater sense of inclusiveness and camaraderie, which are core to a thriving company culture and happiness of employees.
PwC also says it believes in the power of frequent, informal feedback.
Rod Adams, U.S. and Mexico talent acquisition leader PwC said, “Allowing for regular feedback conversations, versus the traditional annual review, helps individuals to maximize their strengths, quickly close gaps, and drive learning and development in real-time throughout the year.“
Do most smaller businesses conduct a similar process for evaluating employees?
As small businesses grow from just one or two employees to a team of full- and part-timers, the performance review process will change.
For Matt McIver, co-founder of Laxalt & McIver, a design studio based in Reno, the process has become more formal.
He says with his tight-knit team of five he conducts sit downs, giving him an opportunity to evaluate the employee’s performance as well as ask for feedback on his leadership style.
For small businesses, performance reviews aren’t just about the employees. Joe Serkoch, owner of Orionvega, a Pittsburgh-based video production company, says he has his employees also review him during performance review chats.
How has The Great Resignation and the labor and wage shortage affected annual reviews? How have salaries been affected?
The pandemic has forced managers as well as employees to be more flexible. The Great Resignation has meant that employees have had to take on new roles to make up for their coworkers who have quit – some roles for which they’ve never been trained.
Managers have had to show flexibility when evaluating these workers, allowing time for a learning curve and understanding that there will be some setbacks as they adjust.
“With traditional performance reviews, employees were using much of their allotted time discussing small-ticket items, leaving them with little time to focus on development and what they can do better. By establishing more regular check-ins, we’ve found that employees are leaving sessions feeling more capable and motivated than ever,” Adem Selita, chief executive officer at the Debt Relief Co. told SHRM.
Business leaders are taking steps to combat The Great Resignation by offering higher pay and more competitive benefits for new recruits and remaining employees, and employees should use their annual performance review to ask for the salary they believe they deserve.
Here are some tips for getting a salary increase:
1. Identify a salary range or percentage increase in pay that you’d be happy with.
3% is considered an average or even generous pay increase. That shouldn’t necessarily deter you from asking for more if you believe your current pay is significantly out of alignment with what you could earn, but it can give you an idea of where to start.
2. Be considerate of your timing when you ask.
It’s best not to ask for a raise if your boss is especially busy, having a bad day, or nervous about impending budget cuts. On the other hand, if your boss has seemed particularly pleased with you lately, now might be a particularly good time to make the request.
3. It might be time to ask for a pay raise if you’ve been doing excellent work for a year since your salary was last set.
Some companies will revisit your salary every year on their own when it’s time for performance reviews. But plenty won’t bring it up on their own, in which case you’ll need to figure out when to bring it up.
If your salary was already increased in the last 12 months, expecting another one before a year is up generally isn’t realistic and is likely to come across as entitled. The same is true if you haven’t been in the job for a year yet.
If you’ve been making a lot of mistakes or your boss hasn’t seemed pleased with your work, a request for a raise isn’t likely to go over well, and you risk seeming like you’re not assessing your own performance accurately.
4. Know your company’s raise and budget cycles.
If you work for a company that generally gives raises once a year, pay attention to when that normally happens.
In some companies, it might be around the anniversary of your start date. Others might assess everyone’s salary at the end of the year – often tied to your employer’s fiscal year and budget process.
Plan to initiate the conversation with your boss at least a month or two before that time period. If you wait until decisions on raises have already been made, it might be too late to ask for the pay raise you desire.
5. Think of what to say if your boss’s answer is “no” or “maybe.”
If your boss/manager doesn’t give you a firm yes and instead says they’ll think about it, that’s okay too. Lots of managers won’t say yes on the spot. But if you get a “maybe,” make sure you’re clear on what next steps are.
If the answer to a salary increase is “no,” this is a perfect opportunity to ask what it would take to earn a raise in the future. A decent manager should be able to explain to you what you’d need to do to earn more.
You can then assess whether you’re able and willing to follow the path your manager lays out. If your manager isn’t able to give you specifics about how you can earn a raise in the future, that’s a useful signal that if you want more money, you may need to leave in order to get it somewhere else.