High-performing teams recognize the business value of reviews and feedback, two key performance management tools. With performance management as one of the top five highest-priority HR initiatives among respondents in 2023 — and learning and development as another — performance reviews and continuous feedback may be getting more attention from HR teams as of late.
Performance reviews are the most common approach to performance management, and most employees know to expect them in almost any role. Performance appraisals evaluate employee progress on established goals and serve as a benchmark for compensation and promotion decisions. The frequency of reviews varies by organization and is dependent on several factors, including goal refresh cycles, level of internal mobility, headcount, and other business characteristics.
Performance reviews give organizations important insight into the type of work employees are doing and the overall value they bring to the company. Reviews also give employees a chance to know where they stand within their team and the organization as a whole. Apart from these high-level benefits, there are a number of reasons why performance reviews are a core element of performance management.
Pros of Using Performance Reviews
- Structure: Performance reviews rely on concrete benchmarks to make accurate assessments of employee performance. By using data to determine how effectively an employee is or isn’t delivering on job competencies and objectives, performance appraisals provide much-needed structure to the evaluation process. This objective approach is also useful for identifying top performers and employees in need of support, and it indirectly pushes companies to document key factors behind decisions that affect employees, such as compensation and promotions.
- Planning: Periodic reviews serve as progress markers for employees with an eye on advancement and career development. This is especially true at companies where annual performance reviews are the only performance management process being practiced. Employees want to know if and how their hard work is paying off and helping them move in the right direction professionally. Performance reviews are a chance for managers and direct reports to sync on past results and future expectations, including opportunities for career growth.
- Combating Bias: Performance appraisal systems are valuable tools for combating bias and promoting diversity, equity, inclusion, and belonging (DEIB) in the workplace. Without the standardized criteria of performance reviews, it’s common for managers to rely on their “gut instinct” when evaluating employees, which can have a detrimental impact on crucial decisions around compensation and promotions. Performance reviews prevent this by ensuring that performance management processes follow the same procedure for all team members.
Cons of Using Performance Reviews
Despite being a necessary tool for almost every company, performance reviews may have a bad reputation for being stressful or time-consuming. Here are a few reasons why reviews shouldn’t necessarily stand alone or simply happen once a year:
- High Stakes: Performance appraisals are a source of anxiety for many employees because these reviews can carry a lot of weight. Performance is directly linked to many important aspects of the employee experience, such as pay, job security, interpersonal relationships, professional development opportunities, and overall confidence in the workplace. The review process also has the power to influence employee-manager relationships. Even with 360-degree performance reviews, which allow employees to receive feedback from their peers, the feedback is often delivered and addressed by only one person — the manager. This puts a lot of pressure on both managers and employees to create a healthy and positive exchange that leads to progress instead of resentment or discomfort.
- Inaccurate Representation: When managers and employees are expected to reflect on a year’s worth of work, some challenges are inevitable. Relying on memory for an annual performance review is a surefire way to gloss over important details that help paint a full picture of performance. Data-driven goals are great for tracking certain types of employee development, but managers should also consider less quantifiable qualities, such as leadership or communication, that add value to the organization. Periodic reviews also leave room for things like recency bias — the tendency to refer to recent events when drawing conclusions, even if recent events don’t match the broader trend. For instance, if you arrived late one day before your annual appraisal, a manager may be more likely to mention tardiness in your review than if you were late months earlier.
- Lack of Agility: Your company, team, and employee objectives set the context for performance reviews that take place across your organization. But goals are fluid, and at many companies — especially ones that are growing quickly — changing circumstances or business needs are constantly driving goal refresh cycles. Performance reviews that take place on an annual basis can become misaligned with shifting priorities, so it’s worth considering whether your organization needs to implement a more agile approach like a continuous performance management strategy.
Continuous feedback is an HR strategy that encourages managers and employees to exchange feedback on a regular basis. While continuous feedback relies on one-on-ones to ensure employee-manager communication occurs regularly, informal feedback is also encouraged. Employee feedback — written and verbal feedback exchanged between colleagues — is another element of a successful continuous feedback strategy.
Companies are increasingly augmenting their performance management process with continuous feedback. This approach creates a culture of ongoing, honest communication between managers and employees (and among peers). It’s also important to note that continuous feedback includes praise and constructive feedback, both of which should be given and received freely throughout your organization, not just from the top down.
Benefits of Continuous Feedback
- Employee Growth: Instead of focusing solely on performance metrics, ongoing feedback drives discussions around employee growth and development as well. Adopting a framework of continuous feedback allows employees to take a more active role in goal-setting. These conversations also encourage employees to seek training or development opportunities in areas that may not be directly tied to their role but provide immediate value to the organization.
- Real-Time Insights: Performance management frameworks that incorporate continuous feedback eliminate room for recency bias and place emphasis on providing actionable suggestions that can be applied immediately. Rather than waiting months to deal with performance issues, managers and employees can use real-time feedback to course-correct or refresh goals without wasting time or resources in the long term. New communication technologies have made exchanging real-time feedback easier than ever, allowing for better collaboration between employees and more accurate and timely insights for managers.
- Improved Employee Engagement: Employees want to know where they stand, and businesses that prioritize regular feedback are investing in a better employee experience by promoting transparency and autonomy. Frequent feedback, both positive and constructive, shows employees that development and recognition are important in the workplace, ultimately driving a more engaged workforce. In fact, Gallup research shows that employees who strongly agreed they received meaningful feedback in the past week were nearly four times more likely to feel engaged than other employees. And with high engagement linked to lower employee turnover rates, improving engagement is a smart move for companies that are prioritizing employee retention.
- Stronger Relationships: Establishing a culture of consistent feedback not only engages employees but also helps with retaining top talent by giving them a sense of ownership over their work. Feedback is also a valuable channel for building strong relationships between employees, managers, and the business as a whole. The more often feedback is exchanged, the more natural and authentic it feels for your employees to pass on helpful comments when they see something that could be improved. Establishing this trust is crucial when it comes to weathering inevitable rough patches as a united front.
Drawbacks of Continuous Feedback
- Oversaturation: Having more feedback is better than having too little, but there’s a fine line between feedback that is helpful and feedback that is overwhelming. Continuous performance management models draw data from a wide range of sources, including project management software, time-tracking systems, testimonials, and more. Sorting through all of this information can be challenging, and it takes time and awareness to discern which pieces of feedback are valuable for employees and which ones are counterproductive.
- Implementation Challenges: Establishing a continuous feedback culture takes time to implement across an entire organization. For managers, encouraging and demonstrating healthy feedback is a time-consuming responsibility that starts at the team level. But transitioning to a mindset of greater connection and communication at work doesn’t come naturally to everyone, and companies often need to find the right tools to help foster the seamless practice of continuous feedback. Making this cultural shift requires budget and buy-in from leadership.
The Solution: A Hybrid Approach
Most businesses find their performance management sweet spot by using both performance reviews and continuous feedback. Lattice’s 2023 State of People Strategy Report found that high-performing HR teams run more frequent reviews and are more likely to leverage feedback from various sources, including from managers, peers, and ad hoc praise.
If your company is in the process of reimagining its performance management program, it’s important to note that the performance review and continuous feedback methods both have something to offer.
Augmenting your scheduled reviews with real-time feedback and regular check-ins is a great way to ensure that performance management is transparent, consistent, and prioritized year-round. The two methods can work together well. For example, with a bank of continuous feedback to reference, managers can complete mid-year and annual reviews efficiently. And with that more frequent feedback, employees will feel supported in working toward their objectives and key results (OKRs) in the time between reviews.
While performance management software that features a feedback system can make this hybrid approach feasible for many businesses, the process of balancing performance reviews with continuous feedback is influenced by a variety of factors, such as company size, industry, and culture. Regardless of where your organization stands, here are some universal tips for getting performance management right at your company:
- Link feedback to goals at the individual, team, and company levels.
- Ask leadership to set an example by offering real-time feedback.
- Create opportunities for sharing feedback regularly via one-on-ones.
- Develop a system for classifying types of feedback (e.g., project-based versus skills-based).
- Use a tool for documenting feedback that can be used at any time.
- Simplify the process of giving and receiving feedback by integrating it with existing tools like Slack.
Reviews are a crucial part of the performance management process, but they shouldn’t be the only opportunity employees have to give and receive feedback. Bringing real-time feedback and performance reviews together can drive your overall performance management program throughout the year.
Using a performance management system can help companies facilitate regular performance conversations and enable managers to provide relevant support at the right time. To see how Lattice empowers teams to manage and improve performance, schedule a demo today.