It’s no secret that annual reviews don’t accomplish what they are intended to do – developing employees and improving performance and productivity. In fact most employees and HR executives will agree that this process is very expensive and in the end counterproductive. The three main reasons why annual reviews are not effective are recency bias, associated anxiety and lack of developmental impact.

It’s impossible for employees to develop if they only receive feedback once a year Click To Tweet

While each one of these on their own can be detrimental to a company culture, employee engagement and ROI, when combined, they diminish the returns on already costly annual reviews even further.

1. Recency Bias

Recency bias is the term given to a bias that causes managers to place more weight on an employee’s recent performance instead of looking at the scope of an individual’s work over the year.

Even the best managers struggle with recency bias as it’s an impossible task for managers to accurately remember what an employee has done over twelve months. Because of this, and even with a manager’s best intentions in place, reviews are often inaccurate and mostly reflect the last few months of work rather than the full evaluation period.

2. Associated Anxiety

Annual reviews create a lot of anxiety for employees. Imagine you are an employee that hasn’t received much feedback throughout the year. Now suddenly during the annual review, you receive a lot of negative feedback that comes as an absolute surprise.

Instead of hearing the feedback during the year and giving you a chance to improve, you are instead given all this feedback in an evaluation that is tied to your compensation. As a result, you are defensive, and deflect the feedback rather than being receptive to it. Instead of creating an environment that is conducive to learning, you are in an environment riddled with anxiety and defensiveness – as a result you are not receptive to feedback. Not only that, you are now unhappy with the annual review process as a whole.

3. Lack of Development Impact

It’s impossible for employees to develop if they only receive feedback once a year – especially when that time is filled with stress and anxiety that spur defensive reactions. Employees need ongoing, immediate feedback directly after an event to be able to change their behavior.

So, how do we fix these issues?

The solution is more continuous, real-time feedback. Recency bias is removed when managers have data from throughout the year that they can reference when writing reviews. Anxiety is removed from the equation if employees already know where they stand because they have been receiving feedback throughout the year – making the annual review a mere recap.

Also, development is now happening, as employees are able to get immediate feedback and improve continuously throughout the year. This all leads to happier, more productive employees.

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