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Pros and cons of annual performance reviews

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Employers use several different tactics to gauge employee performance. Performance reviews can be a valuable means to measuring employee performance, especially with regard to assessing pay increases or other compensation, including upward mobility.
Staff members have strong views on performance evaluations. At their best, these periodic reviews can weed out the hard-working employees from those doing the bare minimum. At their worst, performance reviews can create a hostile working environment. The following are some other pros and cons to consider before performance reviews become de rigueur at an organization.
Performance reviews are a great way to bring employees and managers together face to face. In the hectic environment of a successful business, managers often do not have the opportunity to meet with employees one-on-one for extended periods of time. Reviews make that one-on-one time possible.
The review process also can be an opportunity for employees to figure out their strengths and where they may need a little help. At this point, extra training may be suggested or employees can enroll in specific courses or schooling that will work to promote their upward mobility in the company. This is perhaps the best time for supervisors and employees to agree on how best to improve employee performance going forward.
Supervisors who do not maintain a direct connection with subordinates may not realize any deficits in the business operation. Performance reviews also can help managers get a better idea of what's going on in their departments.
Reviews that take place only once per year can lull employees into a sense of complacency, thinking everything is going fine. Then a performance review may blindside them as to how a manager truly feels about their work. Failure to communicate with employees throughout the year and then surprising an employee with a long list of complaints can negatively affect esteem and productivity.
Employers who tie pay increases to annual reviews may find this practice counterproductive. Employees may not be motivated to improve their performance, particularly if annual reviews are insincere or rote. Pay increases can be based on many different factors and should not be directly correlated to the findings of performance reviews as a reward or punishment system.
Reviews are conducted by individuals, so they are not foolproof. Managers and employees may clash from time to time, so the review process may be affected by past disagreements. Employers can avoid this by asking managers from other departments to review employees to get a more accurate assessment of their thoughts about the business and any changes they might want to instill.
Reviews also tend to cause unnecessary anxiety among employees. Some workers may get extremely nervous about their reviews, while others may become overly competitive with other employees in an effort to earn higher salaries. This can greatly affect employee morale and camaraderie in the workplace.
Some employers feel that annual performance reviews have a place in their organizations. Others provide more consistent feedback periodically through the year to keep employees on target. There are advantages and disadvantages to both approaches.