Performance appraisals are often disliked in the workplace. Employees dread them, managers find them unreliable, and HR questions their value. Despite this dissatisfaction, traditional reviews persist. What can companies do to ensure these systems drive improvement?
The Roots of Resistance
Perceived Unfairness and Bias
Many employees view appraisals as unfair. Rater bias, where personal relationships influence ratings, remains a significant issue. According to a recent study, less than 20% of employees believe their performance appraisals are meaningful or open. This lack of trust undermines the process’s credibility.
Lack of Differentiation
Appraisals often fail at their core purpose: distinguishing between high and low performers. While 96% of employees, managers, and CEOs believe reviews should clearly differentiate performance, only 22% say this actually happens. When everyone is rated similarly, the process loses its motivational power and strategic value.
Time and Resource Drain
Traditional performance reviews are costly and time-consuming. Managers spend an average of 210 hours a year on performance management activities, and employees spend about 40 hours each. Deloitte once calculated their annual review process consumed 1.8 million hours across the firm. Despite this investment, only 2% of Fortune 500 HR chiefs believe these systems inspire employees to improve.
Negative Employee Experience
Reviews are often seen as “time-consuming” and “pointless.” In the UK, 74% of employees say traditional reviews aren’t useful. Nearly two-thirds of employees globally consider them a partial or complete waste of time. The process can feel like a bureaucratic exercise rather than a tool for development.
How to Ensure Reviews Drive Value
Drawing on insights from the Financial Times, McKinsey, and other leading sources, here are proven ways to make performance management more effective and less resented:
Make Reviews Agile and Continuous
Replace annual, high-stakes reviews with regular, ongoing feedback. McKinsey recommends quarterly or even more frequent check-ins to supplement formal reviews, allowing for real-time coaching and course correction. This approach reduces anxiety and makes feedback more actionable.
Balance the “What” and the “How”
Effective reviews assess not just what employees achieve (outcomes, KPIs), but also how they go about their work (collaboration, adaptability, behaviour). This dual focus provides a more holistic view of performance, especially for complex or team-based roles. Gathering examples of specific behaviours observed ensures a fact-based and balanced assessment
Simplify and Clarify Ratings
Many organizations are moving from complex, multi-tiered rating systems to simpler, clearer ones. This makes it easier to differentiate performance and link ratings to meaningful consequences, such as development opportunities or rewards.
Empower Managers as Coaches
Transform the role of managers from evaluators to coaches. Equip them to set clear expectations, provide regular feedback, and support employee growth. This shift builds trust and makes the process more developmental.
Apply Generative AI Skilfully
Thoughtful use of Generative AI can help the manager plan and prepare for meetings, synthesize feedback and draft reviews. This saves time and frees the managers to focus on meaningful conversations and coaching.
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Traditional performance appraisals often fail to motivate, differentiate or develop. They are widely seen as unfair, time-consuming, and ineffective. To reclaim the value of performance reviews, organizations should focus on fairness, agility, and meaningful feedback, while empowering managers to act as coaches. When done right, rather than a dreaded annual ritual, performance reviews can become a driver of growth and engagement.
