Two thirds of larger organisations are making radical changes to their end of year performance reviews radically and one in twenty planning to drop performance ratings all together.

In the firm’s 2015 Performance Management Research report, ‘Big four’ consultancy PwC surveyed 100 UK-headquartered organisations, and 1,000 employees, and highlighted the growing frustration from both employees and management with year-end performance ratings.

Alistair Woods, director of PwC’s reward team, explained that while ditching appraisals might be the right course of action for some, it was important for businesses to use a performance management method that worked for them.

“Companies need to be careful not to throw the baby out with the bath water,” Woods said. “Without the year-end rating, the danger is that the distribution of pay and bonuses can become even more of a dark art as shadow systems evolve without proper governance and infrastructure behind them.”

PwC’s research found that 53% of employees’ bonuses were determined based on individual performance. Without proper evaluation and assessment, monitoring reward packages could become trickier and less transparent.

“Our research shows that when done well, with a balance between rewarding past performance and considering future development needs, performance conversations can really motivate employees,” Woods said.

“Many employees appreciate the clarity that an effective formal assessment provides,” he added, as PwC’s research shows that 67% of employees find year-end reviews helpful in understanding how they are performing at work.

Woods explained that businesses needed to start focusing on equipping managers with the skills and training to deliver effective and motivational evaluations on a more regular basis.

“Organisations should be focusing greater attention on equipping managers with the appropriate skills to deliver effective and motivational performance conversations on an on-going basis and creating a culture where employees can grow and develop,” he said.

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