Theoretically, performance management should happen every day. Think of it this way, if Lionel Messi was playing in a way his manager Luis Enrique didn’t like, would he wait until the end of the season? Absolutely not. They would address the problem immediately and send Messi in the desired direction.

Companies turning to continuous feedback

HR researcher Josh Bersin has estimated that 70% of multi-national companies are moving away from the outdated annual review approach to performance management.

Unsurprisingly, technology firms such as Dell, Adobe and Microsoft are leading the way. Several professional services firms including Deloitte, Accenture and PwC have joined the movement. Even GE, the long-time proponent of the traditional appraisal has decided to axe its annual appraisal model. Here are some of the reasons why:

Lack of efficiency — Appraisals take a lot of time to complete. In a study by CEB, the average manager reported spending about 210 hours (almost five weeks) doing appraisals each year. Yet despite this, 90% of human resource managers believe that annual reviews do not yield accurate information.

Delayed correction — By definition, such appraisals are only carried out annually. Therefore valuable time, effort and resources can be wasted if employees head in the wrong direction. With regular discussions of progress and goal setting, corrective action can be taken immediately.

Demotivating — To make performance appraisals easier to complete, they are simplified for the manager, thus the subordinate is generally rated on a numerical scale of sorts. Social science research indicates that employees would much rather be considered “average” (a rather depressing state of affairs) than be assigned a numeric value for their efforts. The employee experience is important. Employees want to be thought of as more than a number and receive more than just generic feedback according to their score.

Hurts team work — Teamwork is vital to the success of most companies. It is through the sharing of thoughts and ideas that people come up with new and innovative ways to operate and conduct their business. The annual appraisal pits employees against each other, as each member tries to out rank his/her colleagues in order to achieve the highest score and, in many cases, the biggest raise or bonus. This leads to a lack of cohesion and damages teamwork.

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Rigidity of annual appraisals — Annual appraisals are highly formulaic, making them rigid and inflexible. Forms are to be filled in and done during specific time frames. This provides companies with a very real problem as projects vary in duration, lapping review periods, forcing managers to conduct a review sometimes without enough background.

More frequent feedback

As so many companies are overhauling their reviews processes, there is little disagreement that continuous and transparent feedback is the key to effective performance management. In Scaling Up Excellence Stanford Professor Bob Sutton explained the need for transparency and a two-way flow of information between the employee and the manager, as well as amongst peers:

“No matter what system your company uses, regular, frank, and constructive conversations and feedback between managers and their people, and among peers, is the hallmark of a culture and a company that practices effective performance management, and that such exchanges can happen under both traditional and newer systems.”

While indeed these types of exchanges can happen “under both traditional and newer systems,” mandated annual reviews give managers the “cover” to avoid performance conversations until they have to. By then their memory of events is challengeable, and faltering workers may be surprised to discover after hearing no complaint for months, that their work is below average.

Performance management software solutions are now designed to make the process of giving feedback contemporaneous with events, less labor intensive as well as peer involving. And to make it a more positive experience it prompts participants to offer positive praise and feedback, as well as constructive help.