Here's Why You Should Do Away With Annual Performance Reviews

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As a small business owner or manager, it's important to make sure your employees know where they stand -- meaning what areas they excel in and where there's room for improvement. This way, they can add the most value to your business, all the while taking steps to further their own careers.

Many business owners are more than familiar with the annual performance review, which, historically, has served as a prime opportunity for managers to sit down with their direct reports, rehash their performance, and offer concrete suggestions moving forward. But there are several key problems with these reviews, the most pressing one being the timing.

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Think about how these reviews work: Managers compile data over the course of the year and then share that data long after the fact so that by the time workers receive it, performance issues have had the potential to escalate.

In fact, the whole concept of the annual review is a bit baffling when you contemplate it further. Employees come to work every day, and their responsibilities and skills can evolve week by week or month by month. Wouldn't it therefore make more sense to offer more frequent assessments rather than cram a year's worth of feedback into a single session? It's for these reasons that a growing number of companies are doing away with annual performance reviews -- and why you should do so, too.

Bye bye, annual reviews?

Though the annual performance review is still somewhat alive and well in corporate America, according to job site Glassdoor, almost 50% of human resource professionals have either gotten rid of theirs or are considering going this route. The reason boils down to the fact that annual reviews don't do much to improve employee performance.

Because annual reviews, as the name implies, only happen once a year, they offer workers little opportunity to address performance issues in a timely fashion. They also don't give workers an opportunity to solicit regular feedback from their managers, which is often essential to better output and personal growth on the job.

In fact, annual performance reviews often serve as the basis for rewarding employees with raises and promotions. But when you think about it, it's hardly fair to have a policy wherein a strong review results in a pay boost and a negative review results in none -- especially because, again, these one-time reviews afford employees pretty much no opportunity to address their shortcomings and change their fate. As such, annual reviews are something that managers and workers alike often come to dread, and rightfully so.

A better solution

Of course, none of this is meant to suggest that you should do away with manager feedback. Rather, consider providing it on a much more frequent basis. Many businesses, for example, require managers to hold weekly one-on-one meetings with their direct reports so that performance issues that arise can be addressed immediately and more effectively.

Depending on the size of your business, it might very well be the case that you're the sole manager and therefore can't carve out the time for a weekly sit-down with each and every member of your team. But if that's the case, consider implementing a system in which each worker of yours gets feedback on a biweekly, monthly, or even quarterly basis. This way, if you identify issues with someone's performance, you'll have an easy forum in which to address it. At the same time, that worker will receive that information in a timely fashion so he or she can take steps to improve quickly.

One of your goals when running a small business should be to cultivate a motivated, efficient team. Offer up regular feedback, and you'll likely find that your workers' performance improves on the whole.

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