Real-Time Feedback versus Annual Reviews: What Is Best for Your Employees?

The debate about whether real-time feedback versus annual reviews is better for bolstering performance and engaging staff has been ongoing for some time now. The reasons it’s been so hard to solve is that there are distinct advantages to both. While some see annual reviews as more traditional and old-fashioned, others argue that they are a tried and tested method of tracking employee performance in a structured manner. 

Here are some of the pros and cons of both, so you can decide for yourself which better suits your business. 

1. What Is Real-Time Feedback and Its Importance?

Real-time feedback is a process that encourages ongoing conversations with an employee about their performance and growth. In its most literal sense, it can involve utilizing a real-time feedback tool or system that facilitates conversations any time an issue arises. In practical terms, however, it sometimes translates into frequent scheduled discussions that occur every week, two weeks or at the end of an assignment.

2. What Is an Annual Review and Its Importance?

Annual reviews are formal assessments that occur every 12 months. Often, these will take place for an entire company at the same time each year, though it’s also not uncommon for them to occur on a rolling basis from an employee’s start date. They are used to measure KPIs and check that staff are on track in terms of their job specifications.

3. What Are the Pros and Cons of Real-Time Feedback and Annual Review?

Pros and Cons of Real-Time Feedback and Annual Review

3.1 Pros of Real-Time Feedback

  1. Address Mistakes on Time

One of the most obvious benefits of real-time feedback is that managers can address any mistakes instantly and discuss with an employee how to ensure they don’t occur again.

  1. Recognize People When Due

Positive reinforcement can be a powerful tool for keeping people engaged. Real-time employee feedback provides the opportunity not just to rectify problems but also to praise successes. 

  1. Directs Focus to Employee Actions

Another way to think about what real-time feedback is, is to frame it as ongoing coaching. It places the focus on turning employee actions into learning opportunities, so that the individual is constantly developing their hard and soft skills.

  1. Speeds Up Performance Reviews

Each performance review session will naturally be shorter with real-time feedback versus annual reviews because they take place more frequently, and so don’t have to be as onerous. Even if you opt to continue with annual reviews in addition to real-time feedback, these evaluations will be faster because progress has been continuously discussed.

3.2 Cons of Real-Time Feedback

  1. Can Stifle Creativity and Freedom

Any kind of review session should be a two-way street. The trouble with real-time feedback is that it can easily devolve into a manager doling out criticism or praise without involvement from the employee.

  1. Can Be Overwhelming

One of the principal disadvantages of real-time feedback is that it can become overwhelming due to the frequency of discussions, making it difficult to keep track of objectives and expectations.

  1. Time Consuming

Despite being speedier, the time absorbed by real-time feedback versus annual reviews overall can be longer. You may need an adjustment period as you build regular sessions into your workflow.

  1. Can Lead to Micromanagement

With frequent catch ups, the temptation is to begin micromanaging staff activity. Remember that the goal is to steadily develop skills and positive behaviors, rather than critique every aspect of someone’s performance all at once.

3.3 Pros of Annual Review

  1. Saves Time

It’s self-evident that annual reviews take up less time than other setups. Limiting evaluations to once a year mean they will only occupy a couple of work hours max over a 12-month period.

  1. Does Not Lead to Hasty Judgment

When comparing real-time feedback versus an annual review, arguably the biggest advantage in the latter’s favor is that you can take a considered, long-term view of a person’s performance rather than focusing on one-off faults, assessing a complete set of data rather than just snippets at a time.

3.4 Cons of Annual Review

  1. Miss Important Issues

Most of the problems with the annual review boil down to its infrequency, which can lead managers to miss important issues. By the time they are addressed in a yearly evaluation, they may already have become a full-blown crisis.

  1. Can Lead to Inaccurate Feedback

With so much riding on a single session, any flawed evaluation processes or human biases that lead to inaccurate feedback can have serious consequences for an individual, not least because annual reviews are often tied to bonuses.

  1. Unclear Due to Time Gap 

Recency bias can be a major problem for annual reviews, with managers judging an employee solely on how they have performed in the last few weeks or months, rather than summing up an entire year.

  1. Not effective in all cases 

Annual reviews lack flexibility, meaning that goals or objectives discussed and set the previous year may already be outdated or irrelevant by the time the next one comes around.

4. Case Study Examples of Real-Time Feedback versus Annual Review

Case Study Examples of Real-Time Feedback versus Annual Review

4.1 Adobe

Software company Adobe was one of the first really large companies to make waves by abandoning the annual review process in favor of more frequent check-ins back in 2012. Donna Morris, then SVP of human resources, noted that this change resulted in a 30% decrease in the number of employees quitting and a significant reduction in the 80,000 hours formerly spent by managers per year on reviews.

4.2 General Electric

Back in 2015, US conglomerate GE chucked its decades-long annual review policy in favor of continuous performance development via an app entitled PD@GE. The management team noted that this move reflected observable changes in the modern world and the workforce of today, which prizes fast, frequent, mobile-enabled experiences over more traditional setups.

5. FAQs

  • Are Companies Relying More or Less on Annual Performance Appraisals?

An increasing number of companies that weigh up real-time feedback versus annual reviews see annual performance reviews as outdated and out of step with the way people work today. Studies on millennials in particular have shown that 74% of that age group are unhappy with yearly evaluations because it leaves them “in the dark” about how they are faring.

  • Are Yearly Reviews Mandatory?

Some form of feedback process is mandatory at most companies, in order to ensure employees are performing to their full potential, but yearly reviews are not usually given the same weight as they were a couple of decades ago.

  • What Can I Do Instead of Annual Reviews?

Going from an annual review straight to real-time feedback can be a tricky transition, and there are hybrid versions that combine the best elements of the two formats. Alternatively, you can also opt to perform evaluations on a biannual or quarterly basis.