Annual reviews have been fading in popularity for years now. But some companies still rely on them to distribute raises and look at employees’ past behavior.


The evidence and tools in favor of the more holistic, timely concept of performance management are gaining traction, though. This is the year you need to think about making the switch, if you haven’t already. Here are three reasons to consider it:


The Evidence Is Clearer than Ever


The annual review is becoming a thing of the past, and even those still using them don’t necessarily believe in their value, write Peter Cappelli and Anna Tavis for Harvard Business Review.


“Willis Towers Watson found that 45 percent of those surveyed did not see value in the (annual review) systems they used,” they write. “Deloitte reported that 58 percent of HR executives considered reviews an ineffective use of supervisors’ time. In a study by the advisory service CEB, the average manager reported spending about 210 hours — close to five weeks — doing appraisals each year.”


In a business climate that requires near-constant change, talent management offers the chance to give employees immediate feedback and set new goals that align with the company’s priorities.


Benefits of doing so, Josh Bersin writes for the Society of Human Resource Management, could include:

  • Allowing for dynamic team management — that is, the ability to create and change teams quickly.
  • Making goals transparent and easy to change and track.
  • Using technology to keep a finger on the pulse of your workforce.


New Tools Can Help You Do It Well


Tech solutions can ease you into a performance management approach, including apps and software that will help you implement and measure the new strategy with ease.


“Performance management software allows organizations to streamline the performance review process online,” writes Jennifer Post for Business New Daily, and employees often appreciate it, too.


“It satisfies their need for frequent feedback and helps them define a career path,” she writes. “It can keep all employees focused on what is most important to the business and help them engage in its success.”


Less obvious tools might be helpful, too.


“New approaches for applying feedback and models of performance management have also emerged,” Bersin writes. “One vendor offers a system that can analyze patterns of e-mail and … it can actually predict where a security leak or fraud is likely to occur. Another company sells smart badges that monitor workers’ locations and voice tenor to gauge when and where they experience the most stress. This data can be used to help companies reorganize facilities, change meeting times and formats and drive engagement.”


It Doesn’t Have to Be a Radical Shift


Not ready to take the plunge? Many companies are taking a middle-ground approach to annual reviews vs. regular performance management.


“Other firms … seem to be seeking middle ground,” Cappelli and Tavis write. “Companies that don’t think an overhaul makes sense for them should at least carefully consider whether their process is giving them what they need to solve current performance problems and develop future talent.”