HR Management

Continuous Performance Management vs. Annual Review

Feedback is crucial to employee development, both to reinforce positive behaviors and to address and correct negative behaviors. Additionally, regular feedback is important in helping employees advance in their careers within the organization. Unfortunately, many organizations continue to limit their formal employee feedback to an annual review.review

There are numerous benefits that can be gained from more frequent reviews. But even quarterly reviews aren’t getting companies all the way there when it comes to maximizing the feedback loop with employees.

Benefits of Continuous Review

According to the results of the State of Continuous Performance Management Survey, there are significant benefits from utilizing what are known as continuous performance reviews.

Stuart Hearn, an author for Clear Review, says: “Continuous performance management is defined as performance management processes that take place throughout the year on an ongoing basis, as opposed to those based on traditional annual appraisals.”

Specifically, the survey found that companies that used a continuous performance management approach, as opposed to annual reviews, saw reductions in challenges typically associated with annual reviews, including:

  • Reviews being too subjective—reduced by 34%
  • Reviews failing to improve performance—reduced by 32%
  • Managers not providing quality feedback—reduced by 39%
  • Review process doesn’t help retain top talent—reduced by 27%

These are some significant reductions in common flaws with the annual review process.

Reaping the Rewards

The results are intuitive. It makes sense that a review once per year will necessarily be subjective because it’s difficult to objectively measure progress 1 year at a time. Similarly, an annual review isn’t frequent enough to give employees the feedback they need to improve performance now.

And, an annual review doesn’t allow managers to provide quality feedback because they are often unprepared and have little in the way of benchmarks to objectively judge performance. All of this results in lower morale and the greater likelihood of turnover, especially among top talent.

In this post, we’ve reviewed some of the challenges with annual reviews and how data suggest that continuous performance reviews can reduce the effects of those challenges. In a follow-up post, we’ll discuss in greater detail the process of continuous performance review.