Why Annual Performance Reviews Persist Despite Their Ineffectiveness

Recent data reveal that a small minority of employees feel their performance management is truly motivating, and an even smaller fraction of Fortune 500 chief human resources officers think their appraisal systems foster improvement. The practice, originally borrowed from the military in World War I, has endured because it is administratively simple, despite its tendency to focus on distant past events, cause stress, and yield negligible compensation changes.

Companies such as Microsoft, Deloitte and Adobe have experimented with continuous feedback, and about a third of U.S. firms had moved away from annual reviews by mid-decade, but the pandemic prompted many to revert to the once-a-year model. Scholars and HR advisors argue that regular, informal conversations and targeted coaching outperform annual scores, and some firms are experimenting with quarterly check-ins or AI-driven tools to streamline the process. Nonetheless, the entrenched nature of the system means it is likely to remain a staple of corporate practice for the foreseeable future.