Why U.S. Companies are Losing Faith in Traditional Performance Reviews

Performance Management

Go on the Google search bar and type “Performance Reviews”, you will come across several stories of multinational companies eliminating annual performance reviews.

A report published by Bersin by Deloitte stated that, only 8% of companies in their survey reported their performance management process drove high levels of value. 58% felt their process was not an effective use of time.

Not only employers, but employees also have similar view towards forced raking and once-in-a-year performance evaluation system. Many Fortune 500 companies, including Adobe, Microsoft, Accenture, General Electric and Gap, have eliminated the rule-based, bureaucratic annual performance review and rating method.

Lately, the news of adding another brand name to this list has come up. Though it came as no shock, but the news of SAP’s elimination of annual performance reviews has surfaced everywhere in the HR industry.

SAP Eliminating Annual Performance Reviews

SAP, being a global provider of human resource management software itself, has eliminated annual employee performance evaluations. Considering the fact that annual performance scoring system is disliked by everyone (be it employees, managers or HR), this technology giant is now planning to replace its traditional performance management with more frequent check-in discussions and feedback sessions.

SAP’s Human Resource head Wolfgang Fassnach said,

“Grading workers did not work. People are open to feedback, also to harsh criticism, until the moment you start giving scores. Then the shutters go down. ”

He further added, “The old system is too static. It no longer reflects the dynamic circumstances we are operating in.”
{Source: Reuters}

It simply means that the employees need regular feedback from managers, rather than scores or forced ranking. Employees look up to their managers to get answers to – How am I performing? Am I going in the right direction? Am I working hard to meet manager’s expectations? All that employees need to improve their performance is – real time feedback.

Will HR Technology Help Companies to Rethink Performance Management?

Absolutely, yes!

Annual performance assessments have persisted for too long. No doubt, they help employers to keep employees accountable, reward top performers and track employee performance. Over a period of time, annual performance appraisals have caused as many problems as they solve. Instead of guiding managers to coach employees, many employers often end up looking for high performance results. As a result, neither incentives nor once-in-a-year feedback helps to attract and retain best talent.

Absence of regular feedback and open communication could be a reason why annual reviews fall short. But there is no need to completely move away from annual performance evaluations. Instead, employers may like to enhance their performance management process and use it for good. Many big multinational companies have concluded that the future of performance management can be shaped well with regular feedbacks and employee development opportunities.

Employees, looking for constructive feedback & training, may not wait for annual appraisal cycles. They might need feedback more frequently to understand what is expected from them and what not.

Performance reviews can be done better only when managers learn to act as coaches.Managers can help employees to identify their weaknesses and strengths.Having a healthy employee-manager relationship boosts employee performance, increases transparency and improves company culture. Tools, like Empxtrack performance management, help managers to develop strong feedback loops and create a happy work environment.

Our Perspective

The right use of HR technology can re-establish the lost faith in annual performance reviews.

All we need is a well-defined and systematic performance management system where


  1. employees-managers can mutually set goals,
  2. feedback can come from multiple sources,
  3. employees training needs can be identified
  4. top performers can be identified and rewarded,
  5. regular performance can be tracked and
  6. teams can communicate and collaborate easily.

If performance reviews are done in the right way, they can be absolutely fit for your organization. Make sure you use the right set of tools to track performance, train employees and reward top performers.

Are you looking for a way to make your Performance Reviews more effective? Sign up here for a free trial and know how Empxtrack can benefit you!

TAGS: Employee Performance, HR, Online HR Tools, Performance appraisal, Performance Management, Training Management

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