As organisations embrace continuous feedback, HR leaders explain why annual reviews still matter and where traditional appraisal cycles fall short.
The annual performance review has long been a fixture of corporate life. Every year, employees wait to find out how they have performed, managers assess achievements and shortcomings, and conversations about ratings, increments and promotions take centre stage. But when feedback arrives only once a year, the exercise can feel less like an assessment of performance and more like a verdict on the preceding twelve months.
As organisations increasingly adopt regular check-ins and continuous feedback, the question is whether the traditional appraisal cycle still serves a purpose or whether companies need to rethink how they evaluate performance. Annual reviews provide a formal record and a basis for important talent decisions, but they cannot compensate for months of silence between managers and employees.
For HR leaders, the answer lies less in abolishing annual reviews than in reconsidering what happens between them. The real test is whether employees understand how they are performing throughout the year or discover where they stand only when appraisal season arrives.
Sharad Sharma, Chief Human Resources Officer, Pramerica Life Insurance
Regular reviews leave no room for surprises at year end.
Regular performance reviews are essential. Surprising an employee at the end of the performance year by telling them what they did well and where they fell short is neither fair nor effective. Employees should have a clear understanding of how they are performing throughout the year, where they need to improve and what it would take to achieve a better rating.
In an agile, fast-moving business driven by financial and regulatory requirements, there is no alternative to timely reviews. If organisations wait until year end to evaluate performance, valuable opportunities to address gaps may already have been lost.
The frequency and depth of reviews should depend on the nature of the work. Sales teams may require reviews almost daily because performance is closely linked to targets. Functions such as actuarial and finance may need more structured reviews because of regulatory requirements. Support functions may benefit from reviews every two months or quarterly.
What matters is that these conversations happen regularly and meaningfully, rather than simply because they are part of the appraisal calendar.
Annual reviews and continuous feedback are therefore complementary, not competing. The annual review still has a role, but it should never be the first time an employee learns about their performance. By then, the employee and manager should already share a clear understanding of the progress made, the expectations met and the areas requiring improvement.
Takeaway: Performance reviews should be a continuous conversation, not a year-end surprise. The frequency may differ across functions, but employees should always know where they stand.
Balkishan Sharma, Chief Human Resources Officer, Paras Health
Define KPIs at the start, review quarterly and anchor appraisals in evidence.
The problem with performance appraisals is not confined to any one industry. Organisations typically begin the financial year by defining objectives and key result areas, but these are often not reviewed consistently. As a result, appraisals become primarily a mechanism for deciding increments rather than an opportunity to assess progress, address performance gaps and identify where employees need support.
At Paras Health, we link key performance indicators with incentives across the leadership structure, from functional directors to supervisory positions. Each position is assigned no more than five KPIs, all of which must be measurable and tracked through our systems rather than compiled manually. Incentives are then linked directly to the achievement of these indicators.
We review KPIs every quarter. This makes performance assessments more objective and reduces the scope for surprises at year end. An employee who has consistently missed their KPIs across four quarters cannot suddenly be classified as a high performer during the annual appraisal without a clear explanation. It also strengthens managerial accountability because decisions can be supported by measurable outcomes rather than relying primarily on subjective recommendations.
Healthcare still has some way to go at the operational level. For nurses, technicians and other frontline employees, objective indicators such as quality measures and patient safety parameters exist, but appraisals remain a combination of objective and subjective assessments. Strengthening the connection between these indicators and the appraisal process is the logical next step.
Takeaway: Define measurable KPIs at the beginning of the year, review them quarterly and anchor appraisal decisions in evidence. A consistent performance record should carry more weight than a last-minute managerial recommendation.
Puja Agarwal, President – HR, Liberty General Insurance
The annual review should be the outcome of the year, not the main event.
The annual review should simply be the outcome of everything an organisation has done throughout the year. The real focus should be on continuous feedback because that is where organisations can make a meaningful difference to employee performance.
When employees receive timely, structured feedback, the annual review becomes a summation of those conversations. By year end, both the employee and the manager should already have a clear understanding of what the final assessment is likely to look like. Annual reviews assume disproportionate importance when organisations have not invested in continuous feedback. In such situations, too much depends on a single conversation.
Different organisations also measure performance differently. Some have moved beyond assessing individual contributions alone and increasingly emphasise contributions towards organisational goals, encouraging greater alignment between individual effort and broader business outcomes. Others continue to focus primarily on individual performance. Both approaches have merit, depending on the organisation’s objectives, but neither can work effectively without regular feedback.
Whether a company measures individual performance or evaluates contributions towards organisational goals, managers must communicate expectations, discuss progress and help employees understand where they need to improve. Employees need more than a set of goals at the beginning of the year and a rating at the end. They need conversations that help them understand how their work contributes to the organisation and how they can become more effective.
The annual review should remain part of the process, but it should not carry the entire weight of performance management. When organisations get continuous feedback right, the year-end assessment becomes a natural conclusion rather than the defining moment of an employee’s performance journey.
Takeaway: Invest in regular, structured feedback throughout the year. The annual appraisal should reflect ongoing conversations, not replace them.