Why it’s important to conduct annual performance reviews

Most employees expect some kind of performance review – whether it’s an annual performance review, a mid-year review or even just a regular check-in.

That said, it can be a time-consuming part of your business systems (and a date no one really looks forward to putting on the calendar). But it’s not something you should overlook.

Here’s why factoring in performance reviews is important for any business owner.

It helps you isolate problems early.

By problems, we mean anything from gaps in your staff’s training, poor performance you weren’t aware of – or even bullying amongst team members.

If you can pick up issues on a performance review, it gives you a chance to take action and ward off any more significant issues down the track. That might mean restructuring certain employee roles, putting on additional training or working with your employees on how to deal with personality clashes and the culture you expect to see in the company.

The knock-on effects can be a better business that runs more smoothly.

It’s a tool for bringing out the best in your staff.

A recent Gartner study found that employee performance was 10 percent lower in companies that didn’t conduct performance reviews. It’s thought that employee performance tends to decline without reviews because without ratings managers can find it harder to talk about an employee’s performance or have any kind of benchmark for how they performed in the past.

Plus, although reviews have a bad name (and most of us dread them), they’re a valuable way to get feedback about how you’re going in a role – and for employees to give necessary feedback about aspects of the company and its operations that you might not be aware of.

Reviews can eliminate quibbles over pay rises.

Most performance reviews carry some kind of expectation that you can discuss a pay rise or promotion – so without them, those conversations become harder.

And the same Gartner study found that companies who don’t offer performance reviews invariably end up disappointing employees – because without the ratings that come from reviews, your staff may start to doubt that pay is determined by merit. That could lead to a dip in workplace morale and employee retention.

A lack of reviews could also affect employee engagement, because without them, the research shows that managers struggled to set expectations, discuss performance and development and any changes from year to year, and provide recognition for good work.

Performance reviews can help you spot and nurture talent.

If you have employees who are doing great work and are super capable, a review can be a great way to bring their performance to light, and help you figure out as a manager what you might need to do to nurture their talent..

You’ll also immediately get a sense of when an employee is ready to take a step up or be given more responsibility. As a tool to develop your staff’s skills and promote internally, you’ll end up saving time and money on recruitment, too.

Conclusion

Performance reviews may seem arduous when you’re busy with other aspects of running your company, but the research shows just how essential they can be to staff engagement, retention and a streamlined business.

Want more? Check out other posts we’ve written on how to get the most out of reviews and how to structure and conduct successful performance reviews.

Good luck!