How to have a stress free annual review process

Bureaucratic and Unfair

Employees find them bureaucratic and unfair and report one-third of managers are unable to handle them. 43% of managers report feeling burned out. McKinsey’s survey of annual reviews has been saying the same thing since 2016 but nothing changes. Why?

Annual reviews are too complex, time-consuming and rushed at a busy time of year. Managers aren’t trained in how to give reviews and shy away from negative feedback as a result. All but the 5% of staff who were leaving anyway are rated average and above, rendering results meaningless. This denies underperformers the feedback they need and fails to recognise the value of outperformers. How might we do things differently?

Complex and Time-Consuming

The standard annual review has one of two failings. Either it is spreadsheet of 25 factors weighted from 2 to 10%, or a rating system that reveals little. Amateurs have an odd number of ratings, making it too inviting to go down the middle. At least an even number forces managers to select if someone is above or below average. At least it would do, if half of them didn’t input fractions even when instructed not to.

Lengthy reviews are time consuming and leave recipients unsure where to focus for improvement. Long text entries are inconsistent between managers and often end up being wasted. When managers are rushed they are less sympathetic and reviews tend to favour people they prefer, rather than those who added value throughout the year. No wonder employees give such negative feedback.

Managers have a critical role to play in providing feedback and guiding how it is implemented. This works when there are clear markers for improvement and the firm promotes people on those markers. Too often advice is generic, such as “pay attention to people’s feelings” or “have a greater presence in meetings”. Without guidance and appraisal on putting this into practice, the review is soon forgotten.

McKinsey hopes that generative AI will enable training tools that allow managers to practice giving constructive feedback. Yet when managers already feel overworked, finding time to take this training is hard, particularly at year end when it is most needed. A complete answer to the problem of annual reviews must go further.

The Need for Development

Only a fifth of employees report feeling satisfied with their firm’s performance management. This number rises to 77% when there is a regular conversation about development. The answer is to be much more honest in reviews and to make them part of the continuing process of management.

The best review I had was a terrible one. Goals hadn’t been delivered and my rating and the related comments reflected this. The review made me realise that I did not agree with the company’s strategy and my heart was not in its mission. We are fooling ourselves if we think we can turn in top tier performance by going through the motions. My reviewer did me a huge favour pointing this out and I left to pursue something I was passionate about.

In an ideal system, managers conduct a weekly one-to-one with individuals with a three item agenda. This is short enough to be remembered and acted upon. The employee should choose one agenda item so they feel listened to and valued.

The manager keeps track of progress with a traffic light system. Red is when projects are stalled, amber when they are at risk and green when on track. Managers use dashboards to track individual progress through the year and to look across projects and see where bottlenecks are forming. Once a quarter, the one-to-one is a review when progress towards goals is graded. This system ensures continuous learning and saves time by saving paperwork, which in turn relieves stress on managers.

Clarity and Simplicity

McKinsey’s research shows the number of goals is irrelevant and that employees want to know where they stand and what they must do to get better. A relative ranking against peers is important. Clarity and simplicity are the aims whether feedback is quantitative or qualitative.

I wrote about OKRs – objectives and key results – when discussing the importance of optimism. A handful of goals ranked 0 to 1 with a target score of 0.6 or 0.7 is sufficient. Traffic lights are used to review weekly progress and scores updated quarterly.

The Upcoming Review Season

In summary, it does not matter how many goals you have, it’s how the system is implemented. Employees crave continuous feedback and both financial and non-financial rewards. Provided pay is perceived as fair they perform better when feeling valued. There is an exception for sales teams which I discuss here.

Okay, but how do you relieve stress in the upcoming review season under your current system? If you are worried that giving honest scores to your team will make them look bad against grade inflation elsewhere, then give the scores you must. Then tell your team what you did and why. Keep the feedback clear and simple, such as:

“You are doing well in these two areas, and need to improve these three by doing this…” Then set-up your weekly catch-up to review progress using traffic lights.

Questions to Ask and Answer

1. Do individuals have a few OKRs and realistic targets?

2. Is written feedback necessary and, if so, how do I make it consistent?

3. Are managers trained to deliver feedback and award below average grades?

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