Every organization has its own system for tracking and evaluating employee progress. For businesses in the early stages of their performance management journey, this might look like a shared company spreadsheet. For others, this process has been streamlined with a performance management tool. Regardless of which system you use to manage performance at your organization, one thing every company has to decide on is when to run their performance reviews.
Businesses commonly opt for one of two options: anniversary performance reviews and focal performance reviews (there are also project-based reviews which are typically used by consultancies and agencies). Choosing the one that is right for your company depends on a variety of factors, including size, hiring patterns, organizational structure, and more. Let’s take a look at the unique characteristics, advantages, and disadvantages of anniversary and focal reviews.
Anniversary Performance Reviews
Anniversary performance reviews are conducted in cycles that correspond to specific dates for each individual employee, like their hire date or date of their recent promotion. While all employees are evaluated and compensated at the same intervals, anniversary performance evaluations occur on different dates year-round instead of one time throughout the year.
Anniversary performance reviews were introduced to augment employee evaluation processes without significant interruption to the day-to-day workflow of managers or HR teams. They usually take place at annual, semi-annual, or quarterly intervals.
Advantages of Anniversary Performance Reviews
For HR teams
- Performance management is prioritized year-round
- Prevents backlog during performance review peak periods
- Does not require company-wide slowdown during review cycles
- Requires fewer resources to coordinate (i.e., performance data, IT support)
- Only need to evaluate one employee’s performance at a time
- Allows managers to dedicate more time for in-depth feedback
- Works well for evaluating individual performance against formalized standards
- Gives employees an equal amount of time to understand their role and team dynamics
- Compensation and promotion decisions are made in line with precise tenure, which can be seen as fairer than alternative performance review structures
Disadvantages of Anniversary Performance Reviews
For HR teams
- Requires ongoing oversight of hiring calendars and changes to reporting structures
- Low on-time completion rates due to lack of organizational push
- Harder to implement systematic changes to process or criteria
- Performance data is gathered intermittently through the year rather than at one time
- Difficult to create an equitable system where all employees are scored based on the same standard of performance
- Can be disruptive to operations, especially if timed in conjunction with a major project
- More difficult to provide an equitable performance evaluation across team members
- Compensation allocations can be unfair to employees whose reviews take place early or late in the fiscal year or during a slow quarter
- Employees are evaluated against corporate goals at different stages of their completeness
Focal Performance Review
Focal performance reviews are conducted in synchronization across all departments of an organization. Also known as “calendar-driven” or “scheduled” reviews, focal performance reviews evaluate every employee of the company at the same time. This process can last between one and two months to allow sufficient time for everyone to complete required steps, depending on the number of reviewees and complexity of the process.
Focal performance reviews have become a favorite for many companies as a method for managing employee performance consistently across the board with high levels of engagement from all organizational levels.
Advantages of Focal Performance Reviews
For HR teams
- Advance preparation can streamline process and reduce time spent on administration
- Easier to coordinate completion when all departments prioritize performance reviews at the same time
- Provides access to overall workforce performance data for business planning
- Changes to process or criteria (as well as relevant training) can be implemented simultaneously
- Simultaneous evaluations provide context for a more equitable review process
- Easier for managers to plan ahead and prioritize for review cycles
- Simultaneous evaluations provide greater visibility into relative performance
- Logical alignment between follow-up goals at the company, team, and individual levels
- Compensation adjustments are less affected by changing business cycles
- Simultaneous evaluations allow high-performers to stand out and be fairly rewarded
- All employees are evaluated against the same circumstances
Disadvantages of Focal Performance Reviews
For HR teams
- Requires tight scheduling across multiple departments
- Coordinating synchronized review cycles may require a higher budget for the right tools (though the overall cost savings are likely substantial)
- Can be tough on managers who have a large number of direct reports
- May cause managers to provide lower quality feedback to individual employees if they are struggling with time constraints
- Difficult for managers who struggle to prioritize performance reviews over other projects
- Employees are implicitly compared to their peers and teammates, rather than having their accomplishments viewed in isolation
- Can be disadvantageous for employees who join shortly before or after the latest review cycle (although HR teams can prevent this from being a problem through the right policies)
Anniversary performance reviews can work well for smaller organizations that are hiring aggressively throughout the year, for whom a universal performance review period doesn’t make sense. Roles that have a discreet (and fast) progression path may also benefit from anniversary-based touch-points that match their individual cadence. Note that many organizations may still benefit from having an annual check-in in addition to anniversary performance reviews — for calibration or if the company ties performance to compensation.
But as growing businesses recognize the value of investing in robust performance management, many are opting for focal performance reviews as a crucial feature of their performance management system. In fact, Lattice data reveals that focal reviews account for more than 90% of all performance reviews in the last few years.
That’s because focal performance reviews allow HR teams to get the most out of their review cycles and performance data. Rather than squeezing in time for sporadic reviews year-round, managers can dedicate their full focus to providing feedback during company-wide review cycles. And, employees can feel confident that their evaluations will be fair and aligned with goals that were established and communicated in a timely manner across the organization.
Choosing the right performance review type depends on a variety of factors, including organizational maturity, size, hiring practices, and business planning cycles. Whether your business opts for anniversary or focal performance reviews, remember that review cycles are just one part of a larger organizational framework for guiding your people strategy –– also known as your People Program Model.
For more insights on adding value to your business through performance reviews, get in touch with Lattice Advisory Services.