Employee appraisal? No, thanks!

Why traditional employee appraisals are no longer appropriate and what alternative approach you can use

Annual employee appraisals are still standard practice in many companies. Employees and managers sit down together to evaluate performance, define goals and draw up development plans. But what was once intended as an important management tool often causes more frustration than progress today. It costs time, money and nerves, and also reinforces outdated hierarchies. The good news is that there are now better ways to promote performance, cooperation and development.

The objectives of employee appraisals

Employee appraisals should provide a space for communication to discuss important topics that are often neglected in day-to-day interactions. The initial focus is on reviewing the past: this involves summarising the employee’s work over the past period. Which tasks were successfully completed, where were there difficulties, and which strengths and areas for development became apparent?

The next step is to look ahead. The aim here is to redefine the employee’s key areas of competence, reflect on the cooperation between employees and managers, and agree on specific goals and tasks for the coming work period. In addition, development measures are defined to strengthen individual and collective performance.

This makes it clear that the employee appraisal is primarily a management tool tailored to classic, formally defined hierarchies. Managers conduct these reviews with their employees to lay the foundation for key follow-up processes. These include the joint completion of defined tasks and goals, training and development measures, and, if necessary, career and salary development planning. Despite this traditional integration, employee reviews are increasingly coming under criticism, even in conservatively managed companies. [1] And in companies with more democratic structures, they are even losing their relevance altogether.

The efforts involved in employee appraisals

In order to assess whether a management tool is useful, the effort involved and the benefits should be carefully considered. The effort involved in employee appraisals can be described relatively clearly, while the benefits often remain vague.

The preparation alone takes time: appointments have to be coordinated and suitable rooms organised, which ties up capacity in the HR department, among managers and employees. Added to this is the preparation of the content of the meeting, which takes time for both employees and managers. In some cases, additional training in conversation techniques is provided, which means additional costs for training fees and expenses.

Conducting the interviews themselves naturally involves additional effort. Employees and managers invest time, and the more interviews that have to be conducted, the greater the effort required, especially for managers. Additional costs may arise for the use of meeting rooms and materials.

The interviews are often followed by an evaluation, which in turn requires time from employees, managers and, in some cases, the HR department.

In addition to these directly attributable expenses and costs, there are other factors that are more difficult to quantify. These include, in particular, the risk of demotivation if the discussions are perceived as unsatisfactory or stressful. This form of demotivation can have a negative impact on the working atmosphere and, in the long term, on the performance of the team. And what was the benefit of the employee appraisal again?

The problems with employee appraisals

Even in traditionally managed companies, employee appraisals regularly cause problems. Interestingly, some of the most frequently raised criticisms are not particularly convincing. For example, it is often argued that it makes no sense to assess employees who were hired because they were good. However, this argument falls short because the hiring process does not guarantee that new colleagues will actually develop as expected. It also raises the question of how their performance changes over time.

The real problems, however, lie elsewhere. First of all, there is the question of why employees should be assessed annually on their individual performance, especially at a time when fast and joint action and teamwork are crucial. While the importance of cooperation is increasingly emphasised, employees continue to be assessed individually and, as a result, treated differently.

Furthermore, performance reviews cement existing hierarchies. Managers take on the role of evaluators and ultimately decide on salary increases or career advancement. This reinforces a hierarchical system that is often perceived as outdated.

Another problem arises from the time lag: weaknesses, mistakes or conflicts are often only addressed months later. This is problematic for several reasons. On the one hand, human memory is prone to error. In psychology, this phenomenon is known as ‘false memories’. Both subjective perception and subsequent recollection are often unreliable. On the other hand, important learning processes are delayed if they are not initiated promptly. Instead of taking immediate countermeasures, behaviour often remains unchanged for months. [2]

And what could you do instead of employee appraisals?

The simplest alternative is to dispense with employee appraisals altogether and save the associated effort. However, for this to work successfully, it is necessary to improve everyday communication. Only then can the learning and development processes that were previously covered by employee appraisals continue to take place.

A particularly recommended option is an annual, self-organised meeting within the team or working group. This format differs from the traditional performance review in several ways. There is not just one manager leading the discussion; additional moderators can be appointed from among the employees. The focus is no longer on individual performance, but on the quality of cooperation within the team.

The review is not about analysing individual mistakes or performance, but about recognising patterns and recurring themes. It is precisely this kind of observation over a longer period of time that can deliver real added value that spontaneous one-to-one meetings cannot. This creates an opportunity to learn from the experiences of the entire team, rather than focusing on individual assessments.

My plea is therefore: Abolish the traditional employee appraisal and replace it with continuous, short feedback loops in everyday work and self-organised team meetings that take place once a year.

Conclusion

The traditional performance review has lost its place in many organisations. It requires a lot of effort, often provides unclear benefits and reinforces structures that are now widely considered outdated. While it was originally intended to evaluate performance, set goals and promote development, in practice it often leads to frustration, demotivation and a adherence to hierarchical patterns.

The costs and effort involved also speak for themselves. From planning and implementation to evaluation, valuable resources are tied up that are not always in proportion to the return. Another particularly problematic aspect is that feedback often comes too late, delaying important learning processes.

A modern response to these challenges lies in consistently improving everyday communication and in self-organised team meetings. These offer the opportunity to recognise patterns, strengthen cooperation and provide impetus for development – without the burden of outdated evaluation routines.

Those who move away from traditional employee appraisals not only gain time and resources, but also strengthen a culture of cooperation and mutual responsibility. This creates better conditions for sustainable success.

Notes (parly in German)

Are you interested in better participation and more sustainability in your company? Then simply contact Dr Andreas Zeuch and the Unternehmensdemokraten.

[1] Armin Trost: Unter den Erwartungen: Warum das jährliche Mitarbeitergespräch in modernen Arbeitswelten versagt
[2] Added to this are the typical problems of target agreements, which have long been described by proponents of the Beyond Budgeting approach. In Germany, for example, Niels Pfläging has clearly explained in his book Führen mit flexiblen Zielen (Leading with flexible goals) why such agreements often do more harm than good.

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Dr Andreas Zeuch has published more articles on the t2informatik Blog, including: