Managers do annual reviews in the belief they will motivate employees to keep performance consistently high. But a growing number of employers believe that annual reviews are ineffective because employees fear them and managers are loathe to do them. Procrastination results and the supposed benefit — feedback — is negated.

What would happen if you abolished annual reviews in your organization? Would employee performance lag? Would there be no basis on which to determine raises? Would there be no paper trail to document why an employee was fired? Many experts say no.
This isn’t to suggest eliminating reviews altogether. But there may be alternatives that accomplish what the dreaded annual review purports to do.

More Frequent Feedback
Reviews are supposed to give employees feedback so they can correct mistakes and develop their strengths. But doing this once or twice a year is too far removed from actual performance. Not only that, a review that’s initiated by the boss, goes into a personnel file, and is tied to an annual pay raise is an incentive for employees to shape up just prior to the review date and pray the boss doesn’t remember a screw-up from nine months ago.

Instead, give feedback more frequently. One possibility is an ongoing review. Confer with your employees daily or weekly on how they are doing in their jobs. This way you can let them know immediately when something is done incorrectly and can praise them immediately for a task well done. Another benefit to the ongoing review is the review’s informal structure, which reduces the stress level for both employee and manager.
Another technique is a monthly review. In this variation, no one is rated and nothing goes into the personnel file unless the employee specifically requests it. The monthly review isn’t really for assessing performance but instead to see where improvements can be made.

If your company insists on an annual review, you can still take some of the negative connotation out of it for your employees. Do quarterly reviews — spending about one-fourth the time you normally would doing the annual review. Then, when time comes for the annual version, just review the past three months and include the three previous quarterly reviews.

Address Performance and Compensation Separately
If you and the employee have money on your minds during the review, performance concerns take a back seat. But there’s a bigger problem with linking the two. If there’s very little money available for raises, it’s more difficult to rate performance very high. A better way may be to separate the two. Award merit increases based on experience within a specific pay grade and give raises to employees who acquire new skills.

Cover Yourself
If you’re using annual reviews as a paper trail to protect yourself from litigation after a dismissal, it may not work. The once-a-year assessment isn’t frequent enough, the language in reviews isn’t concise enough, and most records are so inconsistent an experienced lawyer can easily poke holes in them.

A better alternative may be to design a special evaluation system for those on the verge of dismissal. Use this evaluation as a temporary intervention to make clear what your expectations are regarding short-term performance.

Advocate Performance Management
Consider abolishing the annual performance review and replacing it with performance management. This isn’t just a subtle semantic name change. It’s an entire change in culture.

Performance management begins when a job is defined and ends when you’ve determined why a valued employee left the company. The goal of performance management is to achieve the company’s mission and vision. The theory underpinning this approach is that few people perform well for an organization unless their personal mission and vision are accomplished.

Performance management uses regular feedback on individual performance based on goals that support the organization’s goals. But the feedback is more a discussion between employees and management with everyone having an equal opportunity for comment.

Also, managers frequently will elicit feedback from peers, direct reporting staff, and customers to get a complete picture of performance. This approach reinforces the company’s commitment to help everyone expand their knowledge and skills for the good of the business.