3 Ways the Annual Review Process Could Change This Year

Performance management is a major topic of discussion among HR professionals right now, with the debate largely centered around how annual performance reviews can be transformed to serve both managers and employees better. Many companies have decided to ditch the annual review process altogether, while others are opting to stick with this old-fashioned technique.

Only 8 percent of companies believe their current performance management processes are highly effective in driving business value, while 58 percent say their performance management processes are not an effective use of time. These statistics illustrate why so many companies are looking to revamp their processes. But what will happen to the annual performance review this year as a result? Here are our three predictions:

1. Companies Will Opt Out of Annual Reviews Altogether

A number of companies have already decided to get rid of annual performance reviews and implement more frequent feedback systems. For example, General Electric (GE) practiced annual performance reviews for decades and was widely known for it. Now, GE has chosen to adopt a less regimented and more frequent feedback system, which has lead to a fivefold increase in productivity.

Another example would be Adobe's new "Check-In" system, in which goals are set annually but feedback is given regularly. Since implementing this process, Adobe has seen a 30 percent decrease in voluntary turnover and a 50 percent increase in involuntary departures. In other words: More great employees are staying, whereas more not-so-great employees are being asked to leave.

Only 19 percent of millennials report receiving routine feedback from their managers, but most millennials want feedback often. Investing in performance management software that allows managers and employees to easily engage in performance management conversations could be a great way to increase employee engagement, productivity, and overall employee happiness. Disengaged employees are expensive. Don't be the last one to ditch annual reviews and invest in real-time feedback.

2. Feedback Might Become a Benefit

Salaries in the U.S. are expected to increase by about 3.1 percent in 2017, up slightly from the 3 percent increase in 2016. While this increase is fairly modest, it still means you'll be bargaining with employees about compensation this year.

However, it's important to know that 79 percent of employees would prefer new or additional benefits to a pay increase. You can use this information to your advantage in salary negotiations by looking to offer new benefits to your employees. As mentioned above, feedback is one thing many employees want but don't receive. Perhaps a new, more agile performance management system could be among the new benefits you extend to employees in 2017?

3. Annual Performance Reviews Will Strictly Be for Big Decisions Only

While many companies are getting rid of annual performance reviews, a lot are keeping them around for when big decisions need to be made. For example, Adobe is still setting goals annually, but it also implements regular feedback about those goals throughout the year. This choice to use annual reviews for structural changes and big decisions is becoming increasingly popular with companies.

As a result, companies will start to look at annual performance reviews much more seriously. However, you can keep your employees at ease with routine feedback in between annual reviews. That will cut all the stress and anxiety from annual performance reviews.


More frequent feedback, performance management as a perk, and more serious annual reviews are just a few of the predictions we have for performance management in 2017. Whether or not your company has experienced these trends itself, now is the time to look at where your performance management process is and where it should be.

A version of this article originally appeared on the iRevü blog.

Michael Heller is the CEO and founder of iRevü.