For many contemporary professionals, the yearly performance evaluation has become an unwelcome tradition marked by paperwork and uncomfortable discussions.
David Hassell, the CEO of 15Five, a company specializing in AI-driven performance reviews, claims that this widespread dissatisfaction highlights a critical inefficiency within organizations, one that has become outdated in our fast-paced technological landscape. Speaking at Fortune’s Workplace Innovation Summit, Hassell pointed out that conventional review practices stem from a time when technological advancements were sluggish.
“Annual reviews were reasonable when things were mostly constant,” he remarked. “Today, with the rapid acceleration of technology and change, our review methods haven’t kept pace.”
Despite the anxiety and outdated nature of annual performance evaluations, many organizations still utilize them to address issues of employee performance or consider promotions. However, a significant number of chief human resource officers (CHROs) regard these reviews as ineffective. A Gallup survey from 2024 revealed that only 2% of CHROs from Fortune 500 companies believe their performance management systems effectively encourage employee growth.
Characterized as a 'backward-looking' process, the main issue with annual reviews, according to Hassell, lies in their timing. Postponing discussions about performance or salary adjustments for an entire year can create challenges for both employees and managers. The comprehensive and labor-intensive nature of the evaluation process often leads firms to default to a yearly schedule. Research indicates that, even with a single annual review, managers can spend approximately 210 hours each year managing performance—time that could be redirected to more critical tasks.
Hassell further criticizes the annual review for its ineffectiveness. Most reviews reflect on past performance, which does little to foster employee development. “Having a conversation once a year about events that occurred three or four months ago is not conducive to helping someone progress,” he stated.
Industry experts have long highlighted the shortcomings of the annual review system. In a recent conversation with Fortune, Dan Kaplan, a senior CHRO client partner at Korn Ferry, noted that the annual review’s existence is primarily based on tradition. He emphasized, “Many successful companies are shifting towards a model of continuous feedback.”
Hassell advocates for a more frequent and streamlined review process to reduce the discomfort associated with evaluations. He mentioned that several of his clients conduct performance reviews as often as four times a year. While he does not recommend such extreme frequency for every organization, he believes increasing the number of evaluations to at least two per year aligns better with most companies’ structures, ideally incorporating continuous feedback on a weekly basis.
He posits that technology can furnish managers with essential data to facilitate coaching conversations, emphasizing employee growth rather than administrative tasks. In this context, AI can alleviate the mundane aspects of performance evaluations, freeing up managers' time significantly. This new approach would make reviews forward-looking, thereby reducing the anxiety employees often experience when preparing for their evaluations.
“There should never be surprises during the review,” Hassell asserted. “At that juncture, you should be documenting past performance while reshaping the entire process to focus on future growth.”
