Two-thirds of employers making changes to annual performance reviews

Two-thirds of employers are making changes to their annual end-of-year performance reviews, according to research from PricewaterhouseCoopers (PWC).

PWC’s 2015 Performance management research, which surveyed 97 large organisations and 1,038 employees, found that 5% of respondent organisations are considering bringing an end to performance ratings completely. 

The research also found:

• More than half (53%) of respondents’ bonuses are performance-related.
• Four in ten employee respondents think that year-end performance reviews are motivating, while 37% consider them to be a waste of time.
• 67% of employees say annual performance reviews help them to understand how they are doing, and just under half (48%) say the reviews help them to progress and think about their career.  
• Almost two-thirds (65%) of employees believe their performance rating is fair, while 63% say it is expected.

Alastair Woods, director in PWC’s reward team, said: “There have been a number of high profile global organisations getting rid of year-end performance reviews and ratings and we are aware of a number of other [employers] considering this move.  

“While this may be the right answer for some, the focus on ratings is a red herring; it is how performance management is carried out that really counts. 

“[Employers] need to be careful not to throw the baby out with the bath water. Without the year-end rating, the danger is that the distribution of pay and bonuses can become even more of a dark art as shadow systems evolve without proper governance and infrastructure behind them.

“Our research shows that when done well, with a balance between rewarding past performance and considering future development needs, performance conversations can really motivate employees.”