The Impact of Performance Reviews on Employee Morale and Productivity

The Impact of Performance Reviews on Employee Morale and Productivity

  November 14, 2023

SEB Marketing Team

As the year comes to a close, employees and managers prepare for the much-anticipated performance review cycle. End of year performance reviews are an important component to the employer-employee relationship offering an opportunity to assess and recognize an individual’s hard work, achievements, and potential for growth. However, how employees perceive this process can determine its effect on their morale and productivity.

If done well, they can cut a clear path toward obtainable goals with a focus on strengths and areas of progress and improvement.  Too much negative feedback, however, can undermine employee confidence and decrease productivity.

There are many who consider the annual performance reviews a stunted, forced exercise where an employee’s performance of the past year is rated, much a like a scorecard with recent performance receiving the heaviest weight. This can be especially disconcerting for employees if other feedback from management is received sparsely, if at all, throughout the year.   

Attempting to place too many things on the agenda is another reason performance reviews can do more harm than good. Performance reviews can be stepping stone to more pay or a promotion, but attempting to cover the review of the past year and the next steps in a single conversation can quickly be derailed if not handled with precise organization.

It is for this reason, managers must understand the impact of their role in employee engagement. While performance reviews might do better to be offered monthly or quarterly, a yearly performance review can be very productive if the following components are kept in mind. 

Be mindful of perceptions:  How managers and employees perceive this process can heavily influence the productivity of annual reviews. While there is growing concern that the yearly review is just too long to wait to assess past performance and look ahead to future expectations, they are none-the-less how many companies still approach the review and appraisal process.

Prepping for the review: Performance reviews can be stressful. One way to ease the stress is to give an employee notice of impending review and possibly a list of what will be covered. Some employees struggle to communicate their achievements successfully, so having time and space to prepare can allow them a better chance to minimize freezing on the spot.

Conduct the Review in a goal-oriented, fair, and objective manner:  The benefits here are numerous, including encouraging goal setting by having a framework to discuss improvement on specific issues, working together to determine blind spots and what training might be available, and keeping the feedback constructive and actionable so that employees have a clear understanding of the importance of their work.

Understand the value of Continuous Feedback: Receiving feedback regularly throughout the year, helps develop an environment where feedback is normal and expected. This way employees and managers are more likely to understand the roadmap of success for each employee and how to assist if something comes up or requires more support. It also allows for the annual review to have more employee engagement and empowerment.

Performance reviews can be a double-edged sword. They have the power to either boost or hinder employee morale and productivity. By recognizing the stress and productivity impact they can have, managers and senior leaders can create a supportive environment that empowers employees to see these reviews as opportunities for growth and development. When leveraged effectively, performance reviews become a valuable tool for ongoing feedback and tracking employee progress, ultimately benefiting both the employees and the organization as a whole.

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