Every now and then—instead of interviewing a rock star of leadership and organizational culture legend—I will rant into the microphone of my podcast, Leadership NOW, and get something off my chest.
After listening to the past few weeks to folks who have endured another "annual performance review" cycle, I decided to turn on the microphone and share my thoughts.
Have you recently (or ever) been affected by the February Fiasco of the Annual Performance Review?
Full Transcript (unedited)
Death to the February Fiasco: Why Annual Performance Reviews Must Go
Hey, everyone, welcome to another episode of Leadership NOW with me, Dan Pontefract; today is a special treat. Every now and then, I will rant about certain things in our organizations. And as I am recording this, it is towards the end of February 2025, which means one thing and one thing only across so many organizations. Yes, folks, it's the dreaded annual performance review. It's that glorious time of year when you or employees shuffle into conference rooms or meeting rooms with these apprehensive smiles where the manager wields a rating form like a solemn priest at a confessional.
Some poor souls attempt to cram 12 months of achievement and mishaps into a neatly delivered package, hoping to impress a boss who barely remembers last Monday's lunch. Now I've, I've, I've heard from a few folks over the last couple weeks whom have endured both the receiving of said performance review annual as well as being the giver of the annual performance review. And I honestly can't find anybody that's happy. I mean, it's remarkable that this annual process remains so widespread around organizations throughout the world. So to understand, I thought first we'd kind of figure out its origins and journey, journey back to the Industrial Revolution. Folks remember a time when factory workers scribbled rating symbols on scrap paper to track widget production. You probably don't, but that was kind of like the late 1800s and call that the early adoption of Taylorism, because by the early 1900s the US Army had decided that soldiers deserve their own grading approach to weed out the sort of less than stellar recruits. And so that solidified kind of Taylorism. And then Taylorism’s scientific management, good old Frederick came to be where we were measuring people like these interchangeable machine parts in an assembly line. Stopwatches ran supreme. Then, sort of over the decades, since executives everywhere have really latched on to that mindset and applying Taylorism in its performance review rankings and ratings to the office environment.
And it's just weird. I gotta, I gotta admit, and so today, organizations are inhabiting, and are dominated, in fact, by knowledge work, these fluid teams that we have, we have instantaneous communication, and it's it's like a blur, a constant blur, of change. Yet what do we do?
We cling to this 100 year plus relic that requires employees to essentially march to a single conversation about their performance from the previous year.
I mean, it's archaic,
So why? Let's call it the February fear factor, and it's a corporate tradition like none other. So every year, February is triggering the same thing. Now, maybe your company is in March. Maybe it's January, but nonetheless, let's just call it the February fear factor. So employees have to go back and dust off their project notes. They got to go back to Slack messages. They got to go back in their teams calls and sort of say, Hey, what did I do? What did I do in May last year? What did I do in March? Oh, my God. And so usually, good managers at least, will say, hey, come prepared to talk about your past year. So employees are freaking out, then managers have to open up some sort of standard form on success factors, or whatever it is that you have with these boxes labeled things like achievements and areas for improvement, and of course, not to be forgotten, the overall rating. So everyone's feigning enthusiasm and the tension. It's basically mirroring a reality TV show and the elimination of people from those shows. So you kind of go in, you're like, will you remain above average from last year? Or maybe you're going to sink to the lowly meets expectations, or worse, building competence. Who knows? So you go in and you know that the idea that performance can be meaningfully gaged once a year is a relic. It's as dumb as thinking the dying.
Stores are going to come back. This type of thinking thrived in factory settings, where there were rigid tasks and really fixed processes. And for today, I still understand it makes zero sense in today's agile digital AI workplace, where we still in February, and the fear of February mark the occasion for this ridiculously contrived performance jamboree.
So
why does it flop? Let's,
let's get into some of the real pain, right? Well, first of all, the obvious, that sort of once a year trickle of feedback, so if you as an employee or you as a leader are not delivering or receiving guidance each and every week at least, and you only get that minimal guidance once per year, then that's just bonkers. So when the single meeting happens when they hear Hey, it's time to talk about that incident in April from last year when you missed the deadline. You're like, what?
It's kind of unfair. You've been waiting, what, 10 months to provide feedback from something that happened in April because someone just like, chalked it up to, oh, I'll, I'll talk about that next February during the annual performance review. So these delayed critiques, these delayed opportunities for constructive direction and feedback. What does it do? It sabotages one's sense of self and indeed their progress and the morale. So the once a year thing is just bonkers. But what about just regular form filling bureaucracy? So if an HR department is its quest is to produce these multi tab, online, digital spreadsheets or essay style question and questionnaires for reviews and both parties, the manager the employee, have to fill them out, and each of them are like diminishing enthusiasm.
Why are we doing this? Why do we create these macabre manifestos of ritual that makes no sense. It drains energy. Really doesn't accomplish much. It's basically a corporate compliance checkbox. So bureaucracy, form filling? Oh, we must do it, because we've always done in that. Always done it that way. Bonkers.
But thirdly, what about, you know, these, the idea that you forget about some of your accomplishments, maybe they're buried in the past. I mean, the modern workplace, your workplace is in overdrive. It's fast. Roles evolve. Teams are shifting, the tasks are multiplying, or they vanish. An annual review cannot capture the flux, the constant flux that you and we all suffer in an organization. So discussing achievements from last March or April might feel quite quaint 10 months later. So maybe we should be thinking about the real development issue is it requires regular updates to have these leadership conversations with each other. Fourth my favorite, perhaps rank and yank.
So when we have these situations where leaders have to submit their rankings to their leader, and so all of a sudden, now we have a bell curve. We have a quota. You can only have so many people with top ratings. You must have people at the dreaded lower tier. But boss, I was meeting expectations last year. Why did I drop? I don't know. I just had to put you down there.
Hey, Boss, how come I'm achieving this year and last year? I met expectations. You had a pretty good year. What about Sally? Yeah, she dropped.
Like, the approach, poisons, team, morale, collaboration, obviously. Like, why would I want to work with somebody if they're going to get a better ranking and rating, and that is tied to compensation and bonuses and ways in which I might make more money. I mean, it's this notion that people will be empathetic and give commensurate to their ranking, their rating is real. So politics is going to play out. And so what you're going to end up with is a very misguided race, pitting one team member versus another for personal gain versus thinking about it from the overall team or collective success, and then you got the fifth one, which is kind of equally troubling. It's like psychological turmoil. So the anxiety when review season hits, the scrambling to recall everything that happened. Yes, they might have documented things, but now you've got to put it into this compelling story and pray.
That your boss interprets their year with a very friendly lens favorable to you, so that, quote, you get that rating or ranking, and then what happens? You might get more money.
It's a high stakes exam with very ambiguous grading criteria. Again, I've used the word bonkers a few times because this atmospheric river of fear and the uncertainty that derea derail, sorry, uh, kind of creativity and engagement is plausible, so I touched on compensation. So let me double click, as GenZ, has told me I'm supposed to do every now and then on it.
So there are, I mean, maybe every but there are so many organizations that tie salary increases, bonuses, restricted stock, units, even promotions, to the annual performance review. And so the combination, then, obviously, because we're human beings, creates this pressure cooker.
So the employee treats the year as really kind of like an extended audition for the manager or their boss's approval, whereas real time improvement or genuine collaboration winds up taking a back seat because survival mode rules the day. So imagine this. So between May and December, you've executed on five pretty cool, successful projects.
In January, one project stumbled, because maybe, I don't know, supply chain issue, something out of side of your control, whatever it is. So now it's late February, and the manager focuses on that one stumble because it's recent, but it's even in this performance year, like it's not last year's.
And so now they're saying, oh, yeah, Dan, you know, I forgot about all that great progress you had last year, because yet, you know, something bad happened, like six weeks ago. So yeah,
and this is the thing, right? You don't have the chance or the pay raise, because what just happened is top of mind to the leader. And yes, it might have been a big hiccup, but that doesn't mean what you did in the previous fiscal year wasn't good, and the outcome it's just way too common. The annual review encourages managers rely on their faulty, reckless recollection, or kind of the recency bias, as social psychologists call it, which does what screws you but erodes. Erodes trust. It erodes loyalty. It creates these fissures and and frankly speaking, it's just it's not good.
So what's next? Then? Well, research.
I looked up a few things these days to see what what's happening. Deloitte published some data in HBr. Very well cited study indeed, whom the organization realized that their formal review process globally actually wasted. That was the word nearly 2 million hours each year.
And so the entire Deloitte organization said, Whoa, that's dumb. So maybe we could do it differently. And they did. There was an organization that pivoted to frequent check ins, and it created clarity for employees, reduced, if not completely eliminated, the consternation of quote the review and those 2 million hours now become coaching moments, as opposed to annual review process and the work that went behind it to get ready for that particular review. Adobe another one. They abolished annual reviews, they instituted a very similar check in approach, and they found that it actually aligned with a stat that they publicly shared. Was that voluntary turnover had been reduced by 30% as a result of just what they did around the entire performance review, annual process and Accenture is another example. They also concluded that the once a year performance review failed to help employees develop or grow in real time. So what did they do? They replaced it with a very continuous coaching approach to how leaders lead their individual teams. So there's some examples out there where the annual review has been abolished, and I say to you kudos Adobe and Accenture and Deloitte. So where is your organization? Are you able to step into the batter's box and to bash the annual review out of the plate there?
I don't know. I think every organization should be thinking about this these days.
Yeah, so can we? Can you think about even as a leader, let alone if your HR team or organization still has the annual review? Can you think about adopting weekly or bi weekly, short kind of one on ones that are human, maybe just 15 minute huddles, discussing what's been going on that week or two weeks, achievements, frustrations, where helps needed, quick pivots, coaching, mentoring sessions. You know, don't sift through ancient history in a single marathon session, but have these quick, regular, short check ins. Can you kind of adopt a coaching mindset over the judge once a year mindset all you Judge Judy's out there. So managers who really see themselves as an ongoing coach, you know you're engaging in open ended questioning, guidance, support, plug for my good pal, Michael Bungay Stanis, the Coaching Habit as a framework. How are you going to focus on skill building and immediate insights for the team member that you're leading? How will you ensure your team member feels psychologically safe when that power dynamic leans towards mentorship instead of judgment, it's a wonderful thing. What about team members and their peers? So what if team members had a pulse on each other's day to day? And there's a way in which for you as the single manager of your team to sort of ask for feedback and to get pure feedback loops going, so that there is after action reviews, there's pre mortems before you do things, so people get a sense that they're not only psychologically safe, but that there's a way in which for us to as a team, to share and broaden the perspective that Each of us bring and there's a greater objectivity than therefore is being brought to the table. What about celebration and recognition and just saying kudos? How do we in the moment celebrate success when it happens, rather than waiting once a year for the here's the three things you did great this year. I wanted to recognize you like, what about teams or slack shout outs or whatever you use as a collaboration platform?
I found in my day that people crave acknowledgement of very tangible, specific examples of their success, the things that they've done, but even the spur of the moment, recognition is so helpful to camaraderie, to trust, to loyalty, to feedback, rather than waiting 12 months later or whatever it may be. Now, what about compensation? Is there a way for you, even as a leader outside of HR, to find ways in which to tie possibly like rewards and promotions to the data collected throughout the year, so that there is a almost scientific, if not statistical, correlation to how people do to what it is that you want to create as salary bumps and the opportunity for that process. So evidence. So are you tracking evidence from a data perspective, so that you're open about it and it can yield, therefore, fairness and clarity with the rest of the team? This is how you're going to make more money. Here's the pool that we have, and then you're open and fair about the compensation decisions. So if you are numerically or statistically aligned, and everyone sees how they can make more money.
Don't you think that would curb paranoia? I do, even though I'm an X Files fan. And then what about just plain old evolving of the development plan? I mean, really do we still have to after you're done your performance review, then submit your annual this is what I want to develop plan. I mean, it's just such a relic of yesteryear. So maybe they should be living docs. Maybe you should be updating these once a month, once a quarter, at a minimum, rather than waiting for the year. This is the three things I'm going to work on this year. I mean, the fast paced pace of our workplace, that was weird. It's just we're we're on a swivel. There's so much to learn.
And what I truly believe is that priorities change. And you can't sort of say these are the three things I'm going to develop this year without recognizing that change does occur. So the shift I hope you can think about, if not you've already there, is moving from the annual review cycle to the more continuous improvement model. And I think that does require a shift in our culture if you're going to think about this organizationally, but you can, at least as a leader, think about your team or unit so you as a leader, you got to recognize that people learn and adapt daily. Right. Accountability is not going to vanish without annual reviews. In fact, I fundamentally believe that accountability actually strengthens when your team.
Members feel supported through those regular dialog, coaching and feedback moments make them timely, not annual. You need to envision a team, or even a workplace where these performance conversations are not feared and they just happen. They happen in the flow of work. You
don't want to hoard accomplishments for the once a year showdown. You don't want your team or you scrambling to recall what happened in February of last year or etc.
You know, we need to get to a point where you your team, the organization writ large, I hope is it transparent, agile and trust, engaging, scenario that's just healthier and again, you're running a business, many of you, and trying to make some cash. So it is about how healthier our team going to be, how collaborative will they be, how innovative will they be? How competitive Are you going to be, especially when it's a turbulent marketplace out there. In order to prosper, we don't want to lose money. We'd like to gain money.
So February should not be fearful. It should be just another month. It shouldn't be this dreaded corporate gauntlet of the annual celebration, quiz, guillotine. Of my past performance. I think we just gotta, we gotta shred this relic, this antiquated, bonkers nonsense of yesteryear, the the era when measuring production lines was the gold standard, is over. Yes, okay, there are some production lines still out there. I'm not trying to knock folks that work in manufacturing, etc, but I'm saying as the systemic way in which to measure performance by production line kind of thinking, it's, that's, it's a limited function and purpose now. It's a knowledge driven environment.
There's stress, there's change. We can't wait a year. If you want to future proof your leadership, you need to be thinking about frequent coaching, Honest dialog, gathering peer input and immediate recognition. When you embrace principles like these, you're going to see more motivated team members. You're probably going to see improve retention, like at Adobe, you're going to see stronger results.
And I, I mean, the rest of this is that I think people deserve an environment, a culture, that matches that type of thinking. So today, as I close out leadership. Now here special episode, I want to challenge you. I want to challenge HR as well.
I want to question and challenge you on the necessity of this archaic annual performance review ritual if you truly want to instill a sense of hope and performance,
if you want to adopt a system of continuous development, rather than this massive, ridiculous once at your performance carnival, if you want your teams to thank you as a leader, you're going to reflect on this rant. You're going to accept the invitation and the challenge and the February fear fiasco of the annual performance review will be rid of going forward.
Thanks for listening to this rant and a very special episode of Leadership NOW with me, Dan Pontefract.
