“Wow! I’m so excited about my performance review,” said no one … ever! Well, not many, anyway. For many leaders, performance reviews are as exciting as a trip to the dentist – costly and painful. Just look at articles from Bloomberg or author and employee engagement expert Kevin Kruse.

Why aren’t performance reviews the development tool we need them to be? Here are six reasons.

  1. The feedback is stale or hidden. Most people want to avoid tough conversations, so we tend to store them up until the dreaded performance review. Or we deliver it but hide it in the “s*&t sandwich.” Or, worse still, we mumble it haplessly in the hope that the full impact is uncovered from under the rock.
  2. They are full of surprises– and not the good kind. Most people are naturally conflict-averse. However, that tendency means that the issue that initially presented as a small problem can become an elephant in the room by the time the review comes around, and it may come as a complete surprise.
  3. There is little room for the “real truth.” The real truth is a combination of what one person knows and what the other person knows. The review process does not typically allow this real truth, as it is time-poor and “telling”-orientated.
  4. They highlight our gaps. While some organizations and managers have cottoned on to the power of building on strengths, most still focus on the individual’s gaps. We only need to look at Martin Seligman’s work on positive psychology to understand that to focus on weaknesses creates little development and change. We need to discuss weaknesses but not put them in the spotlight.
  5. They are too time-demanding. Most managers have many performance reviews to prepare for. As a result, they focus on just getting the job done. There is often little reward for that effort, which can build resentment.
  6. They are stiff and boring. Remember the feeling of going to your first school dance? How awkward it was in your first formal outfit, seeing your date look as uncomfortable as you, but both of you trying to pretend you were fine? Reviews can be similar experiences, too formal for any real discussions to take place.

Having valuable conversations does champion and support people and help them improve. It’s just that the formal performance review process may not achieve this goal.

The History of Performance Reviews – and What We Know Now

The concept of performance management was introduced about 60 years ago as a means to determine the wages of employees based on their performance. In the late 1980s, however, employees started being motivated more by learning and skill development than by financial gain alone. From there, performance management started moving into more frequent monitoring and reviews, with a focus on regular feedback outside the formal review process.

We are now seeing an emerging trend in high-performing organizations where all employees, not just leaders, are being taught to give feedback and to receive feedback with equal candor and grace. Those organizations are in “feedback flow,” but there are far too few with this competitive edge.

Performance reviews require a great deal of preparation and time. Deloitte reported in Harvard Business Review that appraising its 65,000 staff took two million hours each year. In an article from The Australian, Expedia’s executive vice president for human relations said the company changed its performance management system because it wanted to “rehumanize” the relationship between employees and bosses. In a recent PwC survey conducted in Australia, 81 percent of companies reported that their performance management systems were only “somewhat effective” at achieving their goals.

Adobe estimated in 2012 that its annual performance reviews were costing them 80,000 hours of managers’ time each year – the equivalent of 40 full-time employees. After changing its performance review process, surveys revealed higher employee engagement and retention and stronger performance management.

Increasingly, high-performing companies are ditching performance reviews in place of feedback cultures and regular check ins. Adobe led the way and was soon followed by Juniper, Accenture, Microsoft, Deloitte, Zappos, Expedia, Dell and GE. It’s no surprise these companies attract the best and brightest, as they provide the feedback employees need and deserve, and those employees are improving themselves and overall productivity as a result. In fact, Gartner’s 2012 employee engagement report found that when informal feedback is delivered well, it can improve productivity by nearly 40 percent.

Why don’t we implement powerful feedback cultures? There are four main reasons:

  • We still think that “robust” six-month or annual performance reviews will be enough. (They won’t.)
  • Organizations don’t muster the courage to invest in their people and culture.
  • We think the change will be too difficult and too disruptive. Creating a cultural shift requires effort, but without that investment, there will be no improvement.
  • We send our people to training and think it will transform them. When done well, training is a good start – but a start only.

Nelson Jackson said, “I do not believe you can do today’s job with yesterday’s methods and be in business tomorrow.” He was right. Performance reviews shouldn’t be the focus but a process.

Getting rid of them is not black and white.

While performance reviews often fail at engaging, motivating and improving our team members’ performance, getting rid of the reviews is not the solution. You can improve performance reviews, rely on them less and change their focus, but first, you’ll need commitment from the business to become more focused on day-to-day conversations.

If your organization wants to remain not only competitive but ahead of the game, move into the future and make feedback part of your everyday – part of how you flow. Creating a feedback flow is how competitive organizations create happy, productive, fully engaged employees and customers.