I’m guessing that at this time of year many of you are in the process of preparing for or carrying out your annual performance reviews. Determining the deadlines for review documents to be completed and pay increases to be agreed, developing communications for managers and employees to remind them of the importance of completing the reviews on time (perhaps with the threat of ‘no salary increase’ for those who don’t comply), then carrying out the reviews, chasing up and reporting on return rates.
So there is certainly a significant hike in productivity at this time of year linked to the annual performance review process. But do you get the best return on your investment for the hours you spend on it?
Lets look at an example of a business with just 250 employees. Each person spends an average of say 1.5 hours preparing for their annual review and then attends a meeting that lasts one hour (we know they can last longer). And don’t forget an annual review also involves the line manager, so you can double the time and add an additional hour to write up the review. Sound familiar? So that’s 6 hours to review each of the 250 employees. Using the 2018 national average salary, that’s a cost of £23K And if you have 5000 employees, that’s £461K. And this is only one element of the time that is invested in the annual performance review process.
And everyone loves doing it, right? No. Too often the focus is about completing a process within a tight deadline. We can lose sight of the fact that this is about an individual. So how motivational is it really as a management tool? And how many HR teams report on completion of the process, as opposed to changes in performance as a measure of success?
There are various views about the benefits of an annual performance review and I am not going to say an annual review is totally redundant for all organisations. After all there isn’t a ‘one size fits all’ model. But what ever your view point and business needs, there is a real opportunity to be gained from reflecting on whether you are motivating performance and getting a good return on your investment.