Companies Urged to Be Cautious in Shift Away From Annual Reviews

More companies are transitioning from annual performance reviews to regular, informal check-ins amid growing demands for transparency and continuous feedback, a shift employment law scholars say carries a litigation risk if not done properly.

Annual reviews have long been a cornerstone of employee management, allowing business leaders to discuss workplace performance issues, set goals, and outline expectations for the coming year. These reviews also inform business decisions—like who should get a raise, be promoted, or let go.

Now, however, companies like Adobe Inc., Accenture plc, and Deloitte are starting to respond to employee criticism that annual or semiannual performance reviews don’t facilitate the dynamic and supportive environment required to meet the needs of an ever-evolving workforce.

Millennials and members of Generation Z—who are more vocal and place a high value on their purpose and development in the workplace—crave routine feedback and a responsive managerial style when compared with older generations, according to a recent Gallup report.

Frequent feedback on workers’ performance also has become common at small to large-scale professional services and tech firms, employment law attorneys told Bloomberg Law.

Workers can sometimes be “totally blindsided with a negative review” targeting performance issues they’ve never been confronted about until closer to the end of the year, said Heather Brochin, a management-side attorney and chair of Day Pitney LLP’s employment and labor practice.

The “radio silence” from management until an annual review can negatively impact a worker’s potential for receiving a bonus, pay raise, or promotion, she said.

But employment attorneys advise businesses rethink their employee management systems to exercise caution and consistently apply performance standards to avoid perceptions of favoritism or bias that may expose them to liability.

In that respect, having records of annual performance evaluations can benefit employers in litigation over employment decisions like terminations, promotions, and pay.

Thorough documentation can be used as evidence to defend against or disprove allegations of unfair treatment or discrimination, said Bryan Hawkins, a management-side lawyer who serves as managing partner of Stoel Rives LLP’s California offices.

A lack of adequate feedback also risks exacerbating unresolved workplace issues and may be used to support employee claims it reflects a broader pattern of unfair treatment, bias, or stereotyping, Brochin said.

“It serves the company well” when workers are properly coached to improve productivity and efficiency to “bring them to the next level,” she said.

Two-Way Street

A recent report by workplace equity analytics platform Syndio revealed that the traditional approach to performance reviews breeds anxiety and frustration among both employees and management as they believe it’s fraught with issues of supervisor bias and a lack of transparency.

Waiting to provide feedback on performance issues that occurred several months before an annual review may no longer be useful for a worker to make amends, said Qiaojing Ella Zheng, managing partner of Sanford Heisler Sharp LLP’s Palo Alto and San Francisco offices.

Regular check-ins, however, create a two-way street for employees and employers to resolve issues quickly and discuss expectations, the worker-side attorney said.

“That provides a lot of benefits to workers, as long as employers conduct them in a very fair and consistent way,” Zheng said. “At the end of the day, workers want to work and contribute to a company’s growth and development” while also investing in their own personal and professional advancement, she said.

Companies’ desire to control costs and foster greater efficiency and productivity is also contributing to more frequent check-ins, especially with employees working in remote or hybrid environments, attorneys said.

Since the Covid-19 pandemic, the workplace has seen an increase in worker dissatisfaction and concerns about employee mental health, so employers may be touching base to increase employee engagement, said Amanda Brown, a management-side attorney and partner at Reed Smith LLP.

According to a recent Pew Research Center survey, about half of US workers say they’re extremely or very satisfied with their jobs overall, but a much smaller share expressed high levels of satisfaction with their opportunities for skills development, pay, and promotion.

‘Administrative Burden’

Despite the advantages of regular check-ins, determining how often to meet can be tricky because a large volume of feedback can be time-consuming and ultimately overwhelm managers and human resources personnel, Hawkins said.

“It increases and adds an extra layer of administrative burden to HR departments and employers,” he said.

“It can be worth it, but that’s one of the drawbacks” because processing and analyzing feedback necessitates “more work,” and records must be documented and maintained in a timely manner, he said.

A flood of constant feedback also could hinder the ability to resolve performance issues effectively, so managers must streamline their processes to ensure consistency and fairness, Zheng said.

Although performance reviews provide the benefit of written records over time, those records must provide clear evidence of a worker’s performance history and areas for improvement, and that the decision at issue was based on a legitimate, non-discriminatory business reason, attorneys said.

The lack of specificity weakens an employer’s position if a worker challenges an action or decision as discriminatory, particularly if the company can’t show a history of performance issues, said Meredith Plummer, a management-side attorney at Gunster.

Managers also should avoid using generic feedback or simply copying and pasting comments from previous performance reviews—a common practice Plummer and other attorneys have seen in cases they’ve litigated. Workers evolve over time, so their performance should be evaluated based on recent accomplishments, behaviors, and areas for improvement.

Recycling old feedback risks exposing companies to legal trouble because it doesn’t provide up-to-date insights into employees’ growth and development, Plummer said.

When managers aren’t accurately recording and documenting “real issues and with specificity in performance evaluations, that’s going to lend an argument to the employee and create a weakness in the case for employers,” Plummer said.

And that makes it difficult for management-side counsel to defend clients, she said. “My hands are tied behind my back.”