Let’s be clear: annual performance reviews can be invaluable in maintaining alignment

between employee performance and management’s goals and expectations. However, as a growing number of experts agree, annual reviews actually do very little to improve performance, enhance skill sets or develop leadership qualities. Even so, a vast majority of organizations continue to use annual reviews as an employee development tool.
This unfortunate reality was driven home for us recently by the results of a Glowan poll, which asked nearly 200 business owners, managers and HR professionals, “What are you doing—or planning to do—to develop your employees and management for the better?” Nearly 80 percent of respondents said their companies are using annual reviews in this capacity. In fact, this was the number one response, eclipsing even internal training and leadership development programs!
Given employers’ long and widespread use of annual performance reviews, this result isn’t surprising. But it is troubling. The one tool employers are relying on most to develop talent is not going to deliver the desired results.
So, exactly what can employers do to make annual performance reviews more effective as a developmental tool? Glowan’s recommendation: make coaching and mentoring an integral part of your culture.
Coaching and mentoring cultures inspire employees to give their best, to perform to the highest standards day-in and day-out. You could hardly expect the same from a culture that “checks in” with employees once a year. But in coaching and mentoring cultures, performance reviews happen all the time (monthly or more frequently isn’t all that uncommon).
The annual review becomes just that—a review of the challenges, issues and progress that managers and employees have talked about throughout the year.
Of course, using annual performance reviews in their proper context is just one hallmark of coaching and mentoring cultures. If you truly wish to build such a culture, you must also undertake four key initiatives:
1. Assess and develop your employees’ and your organization’s emotional intelligence. Emotional intelligence is the ability to understand, manage and respond effectively to one’s own emotions and the emotions of others—a quality that is absolutely critical to developing effective leaders. One of the greatest benefits of emotional intelligence is that it helps create work environments where people at every level are collaborating and aspiring to do their best work.
2. Hold regularly scheduled one-on-one reviews. As noted above, performance reviews should not be limited to once a year. Scheduling regular one-on-one reviews achieves several important things, including enabling employees to make more frequent adjustments to their performance and clearly validating your commitment to helping employees succeed. To transform these reviews into a truly collaborative coaching relationship, offer developmental coaching in addition to providing the usual feedback, and be sure to create a joint vision of ongoing goals and objectives during each review.
3. Develop your organization’s collaborative advantage. Collaborative advantage refers to the strategic and competitive benefits gained when organizations maximize their collective ability to cooperate with all stakeholders – inside and out – for the benefit of “we”, not “I”. To achieve these benefits, you must institute policies and practices that spread responsibility, authority and accountability throughout the organization.
4. Create a best place to work. Organizations that earn “best place to work” designations share an extraordinary level of trust between managers and employees. As a result, their people are more creative, productive and loyal. It also explains why they attract and retain the very best talent. To put it simply, trust breeds pride and enthusiasm among employees, and when that happens they’re eager to give their all.