The Leader Mindset #37

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Hi everyone,

Thank you for coming back to my weekly newsletter discussing leadership, business and talent management.

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Why Annual Performance Appraisals Are Worthless and How to Make Them Tolerable

I hate performance reviews. There, I said it.

If the annual performance review were a product, nobody would buy it. Definitely, that company is going bankrupt!

Who could justify purchasing something that takes months to complete, that no one enjoys, and delivers almost zero return on investment?

Yet every year, like clockwork, organizations shut down for “review season,” as if this painful ritual somehow proves they have a “high-performance culture.”

Let’s be honest. If this process didn’t already exist and someone proposed it today, senior leadership would likely laugh us out of the room.

They'd ask all the right business questions:

• What’s the ROI?  

• How much time does it take?  

• Does it improve performance?

And the answers would all be something like “no idea,” “a lot,” and “probably not.”

So why do we keep doing them?

What Performance Appraisals Are Supposed to Do

The overall performance management process is meant to be helpful.  If done well, it should:

• Provide employees with meaningful feedback

• Build trust between the manager and employee

• Help the employee improve and grow

• Enhance overall performance

 Indeed, these outcomes matter to both the manager and the employee. 

But what have we built instead? Something that rarely hits any of these goals.

By doing appraisals annually—or even semi-annually—they fail on almost every level. Feedback often comes too late, sometimes months after the work was completed. Evaluations rely only on what the manager or employee can remember. Employees are so focused on compensation implications that actual development is an afterthought. And the process is so backward-looking that what needs to happen going forward is lost in the shuffle.

Consultants and HR keep trying to tweak the process hoping to fix these deficiencies, but small tweaks cannot address the systemic problems.

In my experience, appraisals fail to meet anyone’s needs. Let’s start with the managers.

Managers: They take too long and change nothing

Managers spend hours on a process that yields almost no performance improvement. Early in my career, I conducted a study at a large Fortune 500 company.  We found that the average manager spent 3 to 5 hours per employee conducting a single appraisal (gathering data, writing the review, entering notes into clunky systems, and delivering the meeting). Extrapolate that out to a company with 5000 employees - that is up to 25,000 hours of time or $1.25 million in reduced production (assuming a conservative avg $50 per hour).

Weeks of effort to check a box.  And what’s the payoff?  Usually, a rushed conversation that leaves both parties feeling frustrated and unheard.

Managers know the truth.  Forced distributions, vague scales, and untimely feedback rarely capture real performance or potential.  Time that could be spent coaching, aligning goals, or solving real business problems is lost to paperwork.

Employees: They don’t trust the process

For employees, review day often feels like judgment day. Months of effort condensed into a single phrase: “meets expectations.”

Feedback arrives too late for learning to have an impact. Many employees see the process as biased, arbitrary, or political. Ratings often reflect the rater’s memory, mood, or relationships rather than actual performance.

It’s no wonder that only 14% of employees strongly agree that reviews inspire them to improve, and only about 20% say the process is fair or helps them improve, according to Gallup.

Organizations: Confusing activity with impact

As state previously, performance reviews consume enormous organizational resources. HR teams chase forms, calibration meetings dominate calendars, and productivity dips for two months as everyone turns inward to complete a process few believe in.

Deloitte research found that 58% of executives say their performance management system doesn’t drive engagement or improve performance.  Yet the cycle continues—because it’s tradition, because legal teams want “cover” for impending layoffs, or because HR needs documentation for compensation decisions.

It survives not because it works, but because no one wants to be the one to kill it.

If You Must Keep Annual Reviews, Make Them Tolerable

Unfortunately, for various reasons, performance appraisals are unlikely to disappear anytime soon.  So, if you must do them, here are a few ways to make them tolerable.

Stop writing novels.  Most of that content is never read or remembered.  Use concise, meaningful summaries or actual metrics.  This will reduce the amount of time required to write them. Additionally, if you are a good leader, you should provide feedback throughout the year. Don’t rehash it in the appraisal.

Make it about the conversation.  Apply the time gained in writing the appraisal to the actual discussion.  Share with them real-life examples of their impact and provide feedback received from customers or peers.  Employees want to hear about their impact, not a list of past outcomes that they already know.

Focus on the future.  Shift the conversation to what success looks like next year, not just what was accomplished in the past.

Don’t mix development with performance reviews.  This might be controversial, but separating growth discussions from ratings removes defensiveness and allows employees the space to focus on their growth.

These adjustments will not make your performance reviews an enjoyable experience, but it can keep them from being a soul-crushing waste of time.

The Bottom Line

I know some of you are already knee-deep in this year’s performance appraisal cycle.  I’m sorry.  Truly.

It’s not fun, it’s not fast, and it’s rarely meaningful.  Hopefully, a few ideas from this article will make it at least tolerable by making them a little less about the forms and a little more about the people.

And if you’re feeling frustrated, remember you’re not alone.  Every manager, employee, and HR professional I know feels the same way this time of year. If you have any suggestions on how to improve performance reviews, please share them in the comments.

The good news?  It doesn’t have to stay this way.

In next week’s article, we’ll talk about how to redesign performance management for the future.

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✅ Evaluate the quality of your process
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Andy Noon, PhD

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Thanks for reading and look forward to seeing you again next week.

Andy