Are Annual Performance Reviews Still Relevant in 2026?

Annual appraisals, once considered a ritual of corporate life and a cornerstone of modern-day productivity, are quietly becoming obsolete. Many leading organisations have already moved away from traditional annual performance review systems and transitioned towards more contemporary Continuous Performance Management (CPM) models.

Kelly Services, a global leader in employment solutions, was among the first to eliminate annual reviews, paving the way for companies like Deloitte, PwC, and GE (ironically, the pioneers of the long-practised forced ranking system) to adopt agile, real-time assessment frameworks that reduce administrative burden and improve engagement. A steady shift is being observed, and this reflects the larger transformation in the world of work, driven by rapid technological change, evolving workforce expectations, and the yearning for agility, which requires HR practices to evolve in tandem. As organisations recalibrate their operating models, HR leaders are now rethinking how they should assess, develop, and enable talent, keeping accountability and sustained growth at the centre of performance conversations.
 

From an organisational standpoint, performance reflects the degree to which individuals, and by extension, an enterprise, achieve their strategic and operational goals. For decades, organisations have attempted to enhance efficiency and profitability by designing formal performance management systems, with structured reviews at their core. These reviews have traditionally served as instruments to evaluate progress, allocate rewards, and identify development needs.
 

The roots of formal performance evaluations, as documented by Harvard Business Review, trace back to World War I, when the US military sought systematic methods to make promotion and discharge decisions more equitable. The practice soon transitioned into the corporate landscape, and by the latter half of the 20th century, 90% of US employers had adopted some form of review evaluation. The 1980s saw the rise of forced ranking models, first introduced by GE, where employees were assessed relative to one another rather than against defined standards. Over time, this approach evolved into the conventional annual performance review, a once-a-year self-assessment followed by a structured managerial discussion, often compressed into a short and intense time window. The limitations of annual reviews stem from their traditional design, which was well-suited to the industrial era, when most workers performed repetitive manual labour and work was predictable.
 

A single, high-pressure discussion struggles to capture the complexity and variability of an employee’s contributions across an entire year. Employees often find it challenging to articulate their achievements comprehensively, while managers must rely on retrospective evaluations anchored in goals set many months earlier. Today, over 90% of businesses conduct performance reviews, with nearly 70% of them conducting them annually. While most organisations continue to conduct these reviews the conventional way, nearly nine in ten managers are not happy with their current annual review process.
 

This evolution raises a pertinent question: in an era defined by instant access to information, continuous learning, and accelerated career pathways, can a single annual conversation meaningfully support employee development and manage their performance?
 

Let’s decode what research has to say against the old annual review system:

A. Annual performance reviews are time- and resource-intensive
 

Time constitutes a fundamental dimension of performance across all fields. The principle of optimising time to maximise outcomes remains central to business operations. Yet annual reviews continue to demand significant organisational investment. Estimates indicate that a 100-employee firm dedicates approximately 5,500 hours annually to the review process alone, equivalent to the workload of nearly three full-time employees. This figure excludes the considerable time employees devote to preparing self-assessments. Such resource expenditure prompts a strategic question: could these hours be effectively directed towards real-time coaching, capability enhancement, and performance enablement?
 

B. Annual reviews often do not achieve their intended purpose
 

Younger employees, particularly from Generation Z, are not resistant to performance dialogue. In fact, data indicate that 67% prefer timely, constructive feedback delivered throughout the year rather than during an annual review cycle, when opportunities for adjustments may have already passed.

Annual reviews are also subject to inherent cognitive limitations, including memory decay and recency bias. Managers may struggle to recall specific instances of performance from earlier in the year, which compromises the accuracy and usefulness of feedback. Conversely, recent events tend to disproportionately influence overall evaluations, potentially skewing assessments.
 

C. Annual performance reviews are stressful
 

Research suggests that 22% of employees have taken sick leave on the day of their annual review, and 35% perceive the process as inequitable, often expressing dissatisfaction to their peers. Instead of advancing developmental objectives, annual reviews can heighten anxiety, diminish psychological safety, and reduce openness to learning, ultimately undermining the very outcomes they were intended to drive.
 

These insights clearly indicate that traditional once-a-year performance discussions are increasingly misaligned with the expectations and working styles of today’s workforce. The question, therefore, is not whether annual reviews are outdated, but how HR leaders can meaningfully respond. The way forward lies in embracing contemporary performance methodologies, approaches that better support an agile, development-focused workforce that values continuous learning and timely guidance.

The power of regular feedback culture in career development

The shift towards continuous performance management has been both significant and well-substantiated. Today’s workforce is demonstrably more receptive to frequent feedback and ongoing managerial engagement. A global study by Workleap, covering 150+ countries and over 1,000 organisations, found that while many managers hesitate to give feedback, 83% of employees appreciate receiving it, even when it is corrective. Importantly, this preference does not equate to valuing quantity over quality. The same study reports that 64% of employees believe the quality of feedback must improve, indicating a clear need for managers to be trained in delivering actionable, specific, and development-oriented insights.

“A continuous feedback culture helps dismantle one of the most persistent structural problems in annual reviews: the hierarchical, one-directional flow of evaluation. Regular check-ins make feedback timelier and more conversational, but regular feedback in itself is not enough. To build trust and psychological safety, the feedback needs to be supportive, specific, and geared towards learning rather than judgement. A consistent finding across organisations is that when employees feel safe taking interpersonal risks and seeking feedback, it is associated with greater learning behaviour and team performance. Regular and supportive feedback enhances employees’ sense of belonging and commitment to the organisation. In short, performance improves when feedback is continuous, non-judgemental, geared towards learning and embedded in everyday work, not restricted to a single, high-stakes conversation,” notes Hemant Kakkar, Associate Professor of Organisational Behaviour, ISB.

As HR continues to position itself as a strategic partner to the business, the mandate is clear: design performance systems that reflect how people work today, not how they worked decades ago. This requires equipping managers with the right skills, enabling technology-driven feedback loops, and fostering a culture where development conversations are ongoing rather than episodic.