5 Best Alternatives to Performance Reviews for Your Business

The annual performance review has been a staple of corporate culture for decades, but once-a-year performance conversations no longer cut it in workplaces that change almost daily. Yet many business leaders hesitate to scale back the process, however ineffective, without clear alternatives to performance reviews in place.

More than half (60%) of employees surveyed by Syndio report that their employers continue to rely on the annual performance review process, and that number rises to 73% among enterprise organizations. Nearly two-thirds of employees said performance review processes were sometimes or always a waste of time according to Betterworks’ 2023 State of Performance Enablement report. The challenge lies in finding and implementing effective alternatives that can better support continuous growth and adaptation. 

Discover some alternatives to performance reviews to incorporate into your broader performance management processes.

Why traditional performance reviews are outdated

In the modern workplace, traditional performance reviews are rapidly losing effectiveness. They often fail to provide timely feedback and meaningful support, leaving employees disengaged and unclear about their progress. Let’s explore why these outdated methods no longer meet the needs of today’s dynamic work environment.

Employees don’t receive timely feedback

The annual performance review process encourages managers to only have performance conversations with their reports once per year. But that results in a huge communication gap, leaving employees feeling adrift and unsure of their progress. That lack of communication also prevents employees from correcting problems before they snowball into something bigger.

“Let’s say I’ve been doing something wrong for nine months, and you don’t tell me until the end of the year. I could have fixed that nine months ago and been doing so much better in my job,” says Caitlin Collins, organizational psychologist and program strategy director at Betterworks. “And now I’ve created a behavior pattern that’s going to be so much harder to break.”

Employees who don’t receive timely feedback can’t make the necessary adjustments to improve their performance, and won’t feel genuinely supported in their roles.

“Let’s say I’ve been doing something wrong for nine months, and you don’t tell me until the end of the year. I could have fixed that nine months ago and been doing so much better in my job. And now I’ve created a behavior pattern that’s going to be so much harder to break.”

Caitlin Collins, program strategy director, betterworks

Managers introduce too much subjectivity and bias

When managers only assess performance once a year, it’s easy for recent events to overshadow an employee’s overall contributions. This recency bias can lead to unfair evaluations, where standout moments or recent slip-ups disproportionately affect the review. “Our brains rely on memory,” Caitlin says. “We’re cramming 12 months of the memory of someone, how they showed up and performed.”

That bias in performance reviews can undermine the credibility of the entire process. Employees might feel that their hard work isn’t being accurately recognized, which can lead to resentment and decreased motivation. 

Managers can’t identify growth opportunities

Only receiving performance feedback once per year can stunt employee growth and development, which can have consequences for your overall talent strategy. Without an open line of communication with employees, you might find it challenging to help them cultivate the skills and competencies your organization needs to stay competitive. Additionally, without opportunities for growth, talented employees may become disengaged or frustrated and start looking for opportunities elsewhere, leading to higher turnover rates.

5 effective alternatives to annual performance reviews

As annual performance reviews become increasingly outdated, it’s crucial to explore more effective methods for evaluating and supporting employee performance. Modern alternatives provide ongoing feedback, foster continuous development, and better align with today’s dynamic work environment. 

Check out five effective alternatives to annual performance reviews that can help enhance your performance management strategy.

Continuous performance management

Continuous performance feedback in the form of frequent manager-employee conversations and check-ins is a game-changer compared to traditional performance reviews. Instead of waiting for an annual review, this model provides employees with timely, ongoing guidance and coaching, keeping them aligned with their goals and allowing for immediate adjustments. 

“The true value of manager feedback happens when you can catch people when they can learn and have the right context,” Caitlin says. This approach promotes a more dynamic and responsive work environment, where employees feel supported and motivated to improve continuously.

Moreover, continuous conversations help build stronger relationships between managers and their teams by promoting open communication and ongoing development. As HR leaders, embracing this approach ensures your talent strategy remains agile and effective, driving better business outcomes and a more satisfied workforce.

Peer-to-peer feedback

Peer-to-peer feedback involves employees providing feedback to each other, rather than relying solely on top-down assessments from managers. This method is beneficial as it captures a more comprehensive view of an employee’s performance, encompassing different perspectives from colleagues who work closely with them.

Both managers and employees surveyed for Betterworks’ 2024 State of Performance Enablement report want to see more peer-to-peer feedback as part of their performance management process. And with good reason: One of the key advantages of peer-to-peer feedback is that it fosters a more collaborative and supportive work environment. 

When employees regularly share insights and observations with each other, it promotes continuous improvement and helps individuals feel more connected and valued. This approach aligns well with modern talent strategies, which emphasize engagement and development as critical components for retaining top talent.

Project-based reviews

Project-based reviews focus on the last project an employee completed. Project leaders evaluate employees based on their contributions to specific projects rather than conducting annual performance reviews. This method provides timely and relevant feedback, allowing employees to understand their strengths and areas for improvement immediately after completing a project.

This type of review provides immediate insights that are fresh and directly applicable, helping employees make quick adjustments and improvements. Tying feedback to concrete actions employees recently performed improves learning outcomes. “There’s a positive element of creating behavior change, reinforcing development,” Caitlin says. 

Quarterly check-ins

Quarterly check-ins are regular, scheduled meetings between employees and their managers that occur every three months. These check-ins provide an opportunity to discuss progress, set goals, address challenges, and give and receive feedback in a timely manner.

With more frequent and relevant feedback, your employees can make timely adjustments and stay aligned with organizational goals. Plus, this regular rhythm makes performance management less stressful and more manageable. It ensures continuous growth and development for your team while keeping managers in the loop on progress and support needs.

Goal setting and tracking

Goal setting and tracking involve defining clear, measurable objectives for employees and regularly monitoring their progress toward these goals. This approach focuses on aligning individual efforts with big-picture business goals and provides a structured way to measure and support performance throughout the year.

Tracking goals offers a more accurate look into performance, Caitlin says. “What’s the impact my work has achieved based on my sphere of influence?” she asks. “A lot of that can be determined by goal achievement.” Seeing employees check off goals demonstrates tangible growth and improves performance outcomes.

Regular performance check-ins build and strengthen relationships between managers and team members, giving managers an opportunity to discover their reports’ long-term goals. By implementing goal setting and tracking, you create a more agile, supportive work environment that drives better business outcomes and ensures everyone’s efforts contribute to the bigger picture.

Deciding which performance review alternative to pursue

Before transitioning from annual performance reviews to one of the alternatives, HR leaders should first determine the specific results and performance metrics needed to inform downstream processes like compensation, merit increases, promotions, and succession planning. HR must identify the critical performance data required for these decisions and design a continuous performance process accordingly to ensure that data is captured throughout the year. 

It is also beneficial to re-evaluate if the right metrics are being identified or if new metrics need to be established.

Implementing modern performance management solutions

Modern performance management solutions offer a more dynamic and responsive approach to assessing and improving employee performance than the stagnant annual review can offer. Find out why adopting these advanced tools is essential for your organization.

Enabling real-time feedback

Performance management software makes continuous feedback much more accessible by streamlining the process and integrating it into your daily workflow. With just a few clicks, managers and employees can give and receive real-time feedback, making sure that insights and improvements are shared promptly. This software often includes features like automatic reminders for check-ins, easy-to-use and configurable templates for conversations and feedback, and the ability to track progress over time.

Higher accessibility means conversations and feedback become a natural part of your team’s routine rather than a cumbersome, once-a-year task. It helps build a culture of ongoing development and support, where employees always know where they stand and what they can do to improve. Plus, the data gathered through continuous feedback can be used to make informed decisions about training needs, career growth and advancement, and overall performance management, leading to a more engaged and productive workforce.

Enhancing goal setting and tracking

AI-supported tools make it much easier for employees to set and track goals by providing personalized, data-driven insights and automating routine tasks. These tools can help employees identify relevant and achievable goals based on their past performance and current role. They also offer real-time progress tracking and reminders and allow employees to adjust goals to ensure they remain aligned with business objectives.

Intelligent goal-setting solutions, like Betterworks, facilitate flexible goal setting and promote regular communication, making it simple for employees and managers to stay on the same page. By leveraging AI, you create a more dynamic and responsive goal-setting environment that boosts engagement and drives better performance outcomes.

4 benefits of modern performance management solutions

Modern performance management solutions offer several advantages over traditional methods. By leveraging technology and data, these solutions provide a more effective and efficient way to manage and develop your workforce.

Higher productivity

Modern performance management solutions significantly boost productivity by providing continuous, real-time feedback and goal tracking. Employees who have access to these alternatives to performance reviews are 35% more efficient and productive compared to those who don’t, according to the 2024 State of Performance Enablement report. This approach ensures that feedback is relevant and actionable, allowing for timely adjustments that keep employees on track and aligned with organizational goals.

Increased employee engagement

With continuous feedback and regular check-ins, modern solutions keep employees engaged and motivated. They feel more connected to their goals and receive the support they need to succeed. This ongoing interaction helps employees understand their contributions to the organization, boosting morale and satisfaction.

Data-enabled decision making

Modern performance management solutions gather and analyze performance data, providing valuable insights for HR leaders. You can make informed decisions about promotions, training needs, and overall talent management. The data helps identify trends and areas for improvement, enabling you to tailor strategies that drive better outcomes.

Improved company culture

Regular feedback and recognition help build trust and transparency within teams. When employees view performance management as failing, their trust plummets, especially with HR and company leaders. But it skyrockets by 2x to 4x when employees view performance management as a success, according to the 2023 Betterworks research report. Given the relatively low percentage of trust employees typically have toward HR and leadership, a good performance management process is a huge lever you can use to build trust across your company culture.

Embracing modern performance management

It’s clear that annual performance reviews are no longer adequate for today’s dynamic workforce. They fail to provide timely feedback, often leading to disengagement and missed opportunities for improvement. To stay competitive and support your team’s growth, it’s crucial to explore and implement modern performance management solutions.

By incorporating alternatives to performance reviews through an intelligent performance management system, you create an environment where employees feel supported, motivated, and aligned with organizational goals. Embracing these alternatives not only boosts productivity but also fosters a positive company culture. As HR leaders, finding the right performance management tools is essential for driving better outcomes and ensuring your workforce can thrive.

Want to learn more? Check out these 5 Performance Review Examples to Inspire Yours.