Let's be honest: most employees and managers are frustrated by traditional performance reviews. But it's not just that they're unpopular. Research shows they're fundamentally flawed as tools for evaluating and improving performance. We’ll explore the common problems with annual performance reviews, and alternatives to traditional performance reviews that fix these issues based on the evidence.
What’s Wrong with Traditional Performance Reviews?
And if the standard annual review process doesn’t improve performance, then why keep doing it? It’s hard to change “The Way We’ve Always Done It” – even if that way isn’t particularly effective. But why exactly are performance reviews ineffective?
Performance reviews are wildly inaccurate
Research has found that 62% of the variance in performance ratings reflects the individual biases of the rater rather than actual employee performance. In other words, your rating says more about a manager's rating tendencies than their employee’s actual work.
Annual performance reviews waste enormous resources
Companies invest massive amounts of time and money into annual reviews with little return. Deloitte found they were spending close to 2 million hours annually on performance review. But the juice doesn’t appear to be worth that kind of squeeze: according to a survey from an HR consulting firm, only 3 in 10 employees believe their company's review system helped improve their performance.
Traditional reviews don't drive real performance improvement
Annual reviews and goal setting are too infrequent and disconnected from day-to-day work to actually change behavior.
Better Alternatives to Annual Performance Reviews
The solution to the problems of performance reviews isn’t to ditch them altogether. Despite their ineffectiveness, organizations that have eliminated annual performance reviews don’t see improvements either. Instead, research shows shorter feedback cycles and regular check-ins are far more effective at improving performance.
That’s why we created Develop™ – a toolkit enabling managers and employees by tracking the metrics that matter and facilitating conversations that drive growth. Let’s look at some more effective ways to improve performance
1. Shift to frequent, forward-looking conversations instead of one annual review
High-performing organizations have moved to regular (often weekly) check-ins between managers and employees. These conversations make it easier for employees to ask questions, track small milestones towards larger goals, and identify small shifts they can make to see improvements.
A key component of Develop is its AI-powered Coach Bo, built to deliver strategic and personalized guidance 24/7. Develop's Coach Bo makes these regular check-in conversations easy by:
- Providing contextual conversation starters for 1:1 meetings.
- Offering real-time coaching support whenever managers need it.
- Suggesting relevant discussion topics based on team dynamics.
- Helping managers prepare for important conversations.
2. Focus on development over evaluation during these conversations
Research shows organizations that emphasize growth see better outcomes than those focused primarily on evaluation. Develop enables this through:
- Personalized Manager Guides showing how to support each team member
- Team Personality insights revealing how to leverage individual strengths
- TEAMscan data identifying specific growth opportunities
- AI-powered coaching that builds manager capabilities
3. Set shorter-term goals and learning objectives
Rather than annual goals that quickly become stale, Develop encourages continuous improvement through:
- Regular team experiments based on TEAMscan insights
- 30-day impact sprints for focused development
- Ongoing coaching conversations guided by Bo
- Clear metrics to track progress
These shorter goals are more actionable and practical than their long-term counterparts, allowing for more opportunities to reflect on what how to achieve future goals.
4. Create clear behavioral standards
Having clear, research-backed standards helps create more objective discussions. Develop™ provides this framework through:
- 17 validated dimensions of team effectiveness
- Observable behavioral indicators in TEAMscan
- Science-backed personality insights from EPP
- Clear guidance on high-performing team behaviors
5. Make it a team sport
Research shows peer feedback and team-based discussions often provide better insights than traditional top-down reviews. Develop supports this by:
- Enabling anonymous team feedback through TEAMscan
- Providing team personality dynamics insights
- Facilitating collaborative goal-setting and experiments
- Measuring shared team improvement metrics
Make the Shift to More Effective Performance Reviews with Develop™
Changing the culture around annual performance review practices isn't easy. But the research is clear that traditional annual reviews aren't serving organizations or employees very well. Develop helps organizations make this transition by:
- Providing immediate value through AI coaching
- Making implementation simple and scalable
- Offering clear metrics to demonstrate impact
- Supporting both managers and teams through the change
The key is having the courage to move past "The Way We've Always Done It" and implement evidence-based practices that drive real performance improvement. Develop makes this possible by combining AI coaching, validated assessments, and collaborative tools into an integrated platform that actually helps people improve and grow.
Want to learn how Develop™ can transform performance management at your organization? Let's chat.
