Why Companies Still Use Annual Performance Reviews That Don't Work

Key Points:

• Annual performance reviews trigger the same fight-or-flight response as immediate threats but are largely ineffective, with only 20% of employees feeling motivated by them and just 2% of Fortune 500 HR chiefs believing they inspire improvement.
• Traditional annual reviews are backward-looking, create anxiety, and often fail to provide meaningful feedback or support, while middle managers struggle with time and resources to conduct them properly.
• Many companies have shifted toward continuous feedback and more frequent check-ins, such as quarterly reviews or weekly conversations, to better support employee growth and engagement.
• Some organizations, like e.l.f. Beauty, have abandoned traditional reviews entirely, fostering a culture of ongoing, candid feedback and separating performance discussions from compensation decisions.
• Despite technological advances like AI-assisted evaluations, human interaction remains crucial for effective feedback, as impersonal or automated reviews risk disengagement and fail to address the emotional aspects of performance conversations.