It’s no secret that traditional performance reviews don’t work. Yet, so many managers still use them as the only way to measure employee performance. It’s likely that they’re following a process that’s been handed down from manager to manager. Let’s look at some stats that show why a performance review just isn’t good enough any more. For measuring success, providing feedback, or actually improving employee performance.

9 stats about the performance review process

1. Traditional performance reviews can cost large organisations more than $30 million

According to Gallup, a traditional performance review can cost between $2.4 million and $35 million per 10,000 employees. This is partially due to the direct costs of an annual review. However, it also stems from the volume of HR hours required to effectively implement it and process the results.

2. Managers typically spend 210 hours a year on performance management activities

In an article for People + Strategy, a Deloitte manager referred to the review process as “an investment of 1.8 million hours across the firm that didn’t fit our business needs anymore.” And in a recent CEB survey, managers said they spend an average of 210 hours a year in performance management activities.

3. Employees spend 40 hours a year on performance related activities

In the same CEB survey, managers said their employees each spend 40 hours a year. This is on the low end we suspect. When you’re meeting with your manager to justify your role and pay packet, it’s best to be over-prepared.

4. It always takes more that two people in a performance review process

Think about your own performance review process. Has someone from HR sent you a template? Have you gathered 360 feedback from your employee’s peers? Have you sought advice from other managers to calibrate your team members? The hours and people involved tot up quickly.

5. 47% of performance reviews are completed late

Managers struggle to complete performance reviews on time. They often fall due at the end of quarters when departments are busy closing off projects or meeting external deadlines. And of those 47% running behind schedule, 50% were overdue by 30 days or more.

6. 74% of UK employees say traditional performance reviews aren’t useful

Figures from a YouGov survey found that just 26% rated their performance review as useful. The survey studied the levels of association that respondents had between different words and their performance appraisal. The two most commonly associated terms were “time-consuming” and “pointless” at 39%. The problem with traditional performance reviews is the build-up, combined with the ambiguity. That’s why we suggest supplementing or all-together replacing your annual review with a regular check-in.

7. 80% of businesses are still using traditional performance reviews to some degree

But all that dissatisfaction hasn’t made much of a difference so far. SHRM’s research shows that traditional performance review trends aren’t going away. However, this percentage is slowly falling over time. Many managers and HR leaders are moving away from annual reviews. But the fact remains, they have been ingrained into workplace culture for a very long time. 

8. Only 5% of managers are satisfied with annual performance reviews

Most managers just aren’t satisfied with the quality of traditional performance reviews. This is according to research by CEB. On top of that, only 10% of HR leaders found them to be effective. Interestingly enough, research by the Society of Human Resource Management found similar responses at identical rates.

9. Employees trust their review outcome more using performance review software

This statistic is a bit difficult to cram into a subheading. Basically, McKinsey have established three criteria for an effective performance management system. These are:

  • Goals linked to business priorities.
  • Effective coaching by managers.
  • Differentiated compensation.

Businesses whose performance review frameworks meet these three criteria are far more likely to be perceived as fair by employees. 84% of respondents whose organisations met all three criteria reported a positive impact on performance management. They were also 12x more likely to report effective performance reviews than respondents whose organisations didn’t meet any: go figure!

4 stats about feedback for performance reviews

1. 33% of employees want feedback outside of traditional performance reviews

More than 33% of workers want more regular feedback. This shows that despite the aversion many people have to annual reviews, employees do still want critical guidance. Just not in the way that it’s currently done. Feedback needs to be timely to be effective. Managers need to bring more light-touch feedback into the employee performance process. Starting with Engage365 check-ins as performance appraisal best practice.

2. More regular feedback nearly triples the likelihood of engagement

Employees are 2.7 times more engaged when they get feedback weekly. This is because effective performance reviews are underpinned by frequent, meaningful manager-employee conversations. Which is basically Gallup’s way of saying regular, two-way feedback is critical to performance appraisal best practice.

3. Employees are 5x more likely to agree they receive meaningful feedback

Gallup reported that weekly feedback made employees 5.2 times more likely to strongly agree that they ‘receive meaningful feedback’. And that’s not all. The employees were over three times more likely to strongly agree that they were ‘motivated to do outstanding work.’

4. 74% of millennials feel “in the dark” about their work performance

A lot can happen in the time between traditional performance review cycles. Goals change. Roles change. The world can change! Relying on an annual or quarterly performance review for feedback just won’t cut it. People need feedback no more than 72 hours after an event has occurred to be most effective. So stay on top of progress with regular check-ins.

3 performance review stats about the power of recognition

1. 24% of employees would consider quitting due to inadequate performance feedback

You can’t just ignore a quarter of your staff preparing to leave. This is another way the shortcomings of traditional performance reviews can damage your business. Communicating with staff regularly is vital for keeping turnover as low as possible. One of the best things managers can do in these check-ins is to emphasise personal development. According to previous Gallup research, 32% of surveyed employees who had recently quit their jobs did so due to lack of promotional opportunities as their reason.

2. Employee productivity, performance and engagement are 14% higher in companies with recognition programmes

Recognition is highly correlated with improving employee engagement. And in turn, improves job performance and business value. The right recognition programme has a very measurable impact. Deloitte reports that employee engagement, productivity and performance are 14% higher than in organisations without recognition. And that a 15% improvement in engagement can result in 2% increase in margins.

3. Most meaningful and memorable recognition comes from a manager (28%)

Gallup’s workplace survey data revealed that the most memorable recognition comes most often from an employee’s manager (28%), followed by a high-level leader or CEO (24%), the manager’s manager (12%), a customer (10%) and peers (9%).

So what does an effective performance review look like?

Traditional reviews have issues, we’ve covered that already. But that’s not to say a tweak here and there can’t turn the tables on how useful performance reviews can be. A review needs to be built on a body of evidence. Ideally, evidence collected through a continuous approach towards performance management. 

continuous performance management approach removes the guesswork, the subjective “As I remember it” debate. It shifts the focus of any review or 1:1 onto your people’s real actions, achievement, blockers, challenges and successes. This keeps things focussed and accurate, relevant and impactful.

Hopefully this list of traditional performance review stats has given you some context about employee dissatisfaction. But if you’re still not sure about how to manage performance effectively, then we have plenty of content for you!