Annual performance reviews are still a routine part of company life, but why? One study found that 95% of employees are dissatisfied with the process, and almost as many, 90%, don’t believe they provide accurate information. So what can HR leaders and department managers do to make these yearly initiatives more valuable for both employees and organizations?

Make the reviews process ongoing and feedback-focused!

According to a 2015 study from the Brandon Hall Group, the writing is on the wall; or for that matter, the bottom line. Companies that make the switch from yearly evaluations to a culture of ongoing performance management have saw a:

70% increase in revenue

72% decrease in turnover

54% boost to customer satisfaction scores

The key word is ‘culture.’ To truly integrate this new model of performance management — and make it impactful and lasting — companies need to make it consistent and frequent. The trend of continuous performance reviews has developed as a response to meeting the evolving needs of workers. Millennials want to receive feedback 50% more often than other employees, yet they also say 46% of managers fall short in that request. This has a negative effect on performance: engagement drops to 2% when managers ignore the needs and goals of their direct reports.

What are the keys to successfully building a culture of continuous performance management? And how can companies fully harness it to drive organisational growth?

Learn the critical steps needed to create a culture of ongoing performance management:

A senior HR executive at General Electric, which recently scrapped yearly evaluations, declared: “If you’re waiting a year to give meaningful feedback, it’s already old news.” Yearly performance reviews are trending down because they’re generally ineffective: waiting until December to evaluate the workforce doesn’t lead to the growth employees want, while managers waste tremendous amounts of time conducting them without getting many insights in return.

Furthermore, the formal annual review process can take as many as 20 hours, and that’s just the amount of time spent preparing for it. A manager with 10 direct reports could be looking at 200+ hours of prep time. In a smaller company, no one can afford that.6 More damaging is that of all the hours spent on this, none of it is related to performance, feedback, setting or achieving goals, or even career mapping.

A more effective evaluation strategy is for managers to establish regular check-ins with employees to discuss goals, performance benchmarks, and measure employees’ progress in reaching aligned objectives. Use these chats to embrace feedback. One CEO and leadership expert says regular check-ins deliver value to managers and employees alike: they fix small problem before they become big, and just 90 minutes of time can boost performance for two or more weeks. There is also a further business case for the power of feedback - companies who provide it see 14.9% lower turnover rates.

Ongoing performance discussions should also address any skills and knowledge gaps by providing relevant training. Offering employees the chance to broaden their skill set boosts engagement, productivity, retention levels, and succession (or mobility) opportunities.

Just 7% of employees understand their company’s goals or how they fit into them. Managers need to communicate the organisation’s goals so their direct reports will see how their work fits into the bigger picture. Otherwise, they risk a disengaged workforce. Prevent this by aligning employee’s individual ambitions with what the organisation needs to help attain their marketplace goals.

Making performance management a continuous process, rather than a yearly time-drain, enables managers and employees to:

Discuss each other's goals

Align them to drive mutual success

Adjust as necessary

Giving employees a sense of purpose, and the knowledge that their discretionary effort is leading to the next rung on their career ladder, will boost their engagement and productivity. Also, when employees are able to take ownership of their goals and routinely discuss them with managers, they’re 24 times more likely to achieve them.

The global workforce lists “an opportunity to grow” as one of their top needs, so how can managers leverage a culture of ongoing performance management to address that goal? During weekly check-ins, they can discuss learning opportunities that will help build skills, address knowledge gaps, and even prepare employees for new challenges.

A lack of training has devastating consequences: organisations with only a minimal investment in it see 74% lower profit margins, and one study that included companies in various industries found that no training led to a 35% higher turnover rate.13 However, even a traditional approach, such as company-provided training, boosts retention by 93%14 and improves team morale.

The results of training make a tremendous bottom line impact. Organisations with a strong learning culture are:

92% more likely to innovate

52% more productive

56% faster at hitting the market with new offerings

17% more profitable than their competitors

Summary: Companies are increasingly ditching the outdated idea of yearly performance reviews and replacing them with a culture of continuous check-ins that are focused on goals, growth, and feedback. This leads to increased engagement, productivity, and retention, all of which strengthen revenue.