The beginning of the end of annual reviews for staff?

Published: 10th August 2015

The beginning of the end of annual reviews for staff?

Work by global professional services firm PwC indicates that more and more large companies could scrap annual performance reviews for staff in a bid to improve employee engagement.

PWC’s comprehensive 2015 Performance Management Research report, which surveyed 100 UK-headquartered groups and 1,000 employees, found that businesses find the year-end process frustrating and two thirds are adopting a culture of continuous feedback. But PwC also highlighted the potential pitfalls of this approach and warned this could impact staff bonuses, with more than half (53 per cent) dependent on individual performance reviews.

Alastair Woods, director in PwC’s reward team, said: "There have been a number of high profile global organisations getting rid of year-end performance reviews and ratings and we are aware of a number of other companies considering this move. While this may be the right answer for some, the focus on ratings is a red herring – it is how performance management is carried out that really counts. The real problem has been that performance management happens just once a year."

The report also revealed that the more than two thirds (67 per cent) of employee respondents said the year-end review was useful, with 48 per cent stating it made them think about their progress. Woods suggested: "Organisations should be focusing greater attention on equipping managers with the appropriate skills to deliver effective and motivational performance conversations on an ongoing basis and creating a culture where employees can grow and develop. Without the year end rating, the danger is that the distribution of pay and bonuses can become even more of a dark art as shadow systems evolve without proper governance and infrastructure behind them."