What Successful Organizations Are Doing Differently with Performance Management

In recent years, there has been a sea‑change in how companies think about performance management.

Traditional performance reviews were once the bedrock of people management, but today they are increasingly viewed as outdated and ineffective. Gallup research shows that only 14% of employees strongly agree that their performance reviews motivate them to improve, and this sentiment is echoed by many HR leaders. Klaar’s performance management platform reported that 98% of chief human resources officers (CHROs) are dissatisfied with their current performance management systems. Further, companies that prioritize effective performance management are 4.2 times more likely to outperform their peers and see 30% higher revenue growth. Clearly, something is broken, and forward‑thinking organizations are remaking the playbook.

This blog explores what successful organizations are doing differently with performance management. The focus is on performance management best practices, modern performance reviews, continuous feedback, effective performance management systems, employee development and coaching, and goal alignment. By learning from examples such as Adobe, Deloitte and other innovators, HR leaders in the C‑suite can create a people‑centric system that drives engagement, reduces turnover and improves business outcomes.

The Shift in Performance Management

Annual performance reviews have long been a ritual in corporate life. Yet their shortcomings are now widely acknowledged. Gallup’s data show that very few employees believe formal reviews motivate them, and many senior HR leaders admit that their review process fails to drive performance. Traditional appraisals are not only demotivating; they are also time‑consuming. Deloitte’s old process – with lengthy forms and annual ratings – consumed nearly two million hours each year. That is a major productivity drain.

The corporate world is therefore moving toward continuous feedback and development‑focused conversations. When managers provide meaningful feedback in the previous week, 80% of employees are fully engaged. Employees are also 3.6 times more likely to feel motivated to do outstanding work when feedback occurs daily rather than once or twice a year. At the same time, many executives recognize that technology can help modernize the process. Microsoft’s 2024 Work Trend Index show that, 75% of global knowledge workers now use some form of AI, and when Oracle tested an AI‑assisted performance review in 2023, 89% of employees were willing to adopt it. These statistics underscore why companies are abandoning annual reviews in favor of more responsive, data‑driven systems.

Why Traditional Performance Reviews Fall Short

Although annual appraisals may seem like a fair and structured approach, they often suffer from bias, recency effects and poor alignment with daily work. Many HR leaders acknowledge that their systems do not reflect employees’ real contributions. In a B2B recent report, 77% of HR leaders said traditional reviews fail to capture day‑to‑day work. Worse, fewer than one in three employees view reviews as fair and 64% consider them a complete waste of time.

The inefficiency is staggering. Managers often spend weeks collecting examples and writing narratives, only for feedback to arrive long after the behavior occurred. Deloitte’s own performance management overhaul was prompted by the realization that the process consumed two million hours of time while delivering little value. Many organizations continue to use spreadsheets or complex rating forms: 58% of companies rely solely on spreadsheets to track performance. With so much time and energy spent on forms instead of conversations, it’s no wonder employees feel unmotivated.

Bias is another critical issue. Traditional performance ratings often reflect subjective impressions, not objective outcomes. The B2B Reviews report notes that 61% of managers and 72% of employees do not trust their organization’s performance review process. Underrepresented groups, including women and minorities, frequently receive vague or personality‑based feedback that limits their growth. When evaluations are untrusted, both engagement and retention suffer.

Moreover, annual reviews often fail to set clear expectations. Nearly 47% of employees say they don’t know what’s expected of them at work. Without clear goals and timely feedback, employees can’t adjust their behavior or prioritize tasks effectively. Given these problems, it’s not surprising that only 6% of companies report meaningful progress in redesigning performance management. Yet change is urgently needed: 65% of companies say rethinking performance management is important, but only 24% have started making changes.

Continuous Feedback and Regular Check‑Ins

One of the most significant shifts among high‑performing organizations is the move from annual reviews to continuous feedback. This approach emphasizes frequent, informal conversations that help employees stay aligned and grow. Gallup’s research reveals that employees who receive meaningful feedback each week are far more engaged, and they are 3.6 times more likely to be motivated to deliver exceptional work when feedback occurs daily. Continuous feedback also responds to employees’ desire for immediacy; many prefer coaching in the moment rather than waiting months for an annual appraisal.

A celebrated example of this transformation comes from Adobe. The company abolished stack rankings and annual reviews in 2012, replacing them with a “Check‑In” system. Managers meet with employees regularly to discuss goals, progress and development needs. The results were striking: voluntary turnover fell by 30%, and retention improved by 25%. Just as importantly, 94% of employees reported that their check‑ins were helpful. Adobe’s experience demonstrates how continuous feedback builds trust and clarity, especially when managers are trained to give supportive, forward‑looking guidance.

Microsoft, General Electric and other large firms have made similar moves. These companies shifted from rigid ranking systems to more frequent touchpoints that emphasize coaching and collaboration. Implementing weekly or monthly check‑ins is even more practical because teams are often smaller and relationships more personal. B2B Reviews points out that 75% of companies plan to shift to real‑time performance management by 2025. HR leaders who embrace continuous feedback can get ahead of this curve and differentiate themselves as employers of choice.

Coaching and Development Over Ratings

Another characteristic of successful performance management systems is the shift from evaluation to employee development and coaching. In many companies, annual reviews revolve around scoring employees or ranking them against peers. This often fuels anxiety and discourages collaboration. Instead, leading organizations are focusing on growth. For example, Deloitte redesigned its performance process to emphasize quarterly conversations and strength‑based coaching, replacing backward‑looking evaluations. The firm found that focusing on learning and development – rather than assigning a numerical rating – not only saved time but also improved engagement.

The benefits of coaching are supported by research. Gallup reports that employees are significantly more engaged when managers provide regular, constructive feedback. PassiveSecrets’ note that 70% of employees say coaching and feedback technology improves their performance. Coaching conversations enable employees to align their goals with organizational priorities while building skills for future roles. This shift is particularly important for mid‑market companies, where talent development is a strategic advantage.

Prioritizing development also means helping managers become better coaches. The B2B Reviews report highlights that only 26% of companies believe their managers are highly effective at enabling performance, and managers spend just 13% of their time developing people. Training managers to give timely, specific feedback and to co‑create development plans can therefore have a huge impact. When coaching becomes part of the culture, employees feel supported in their growth and are more likely to stay.

Fair, Data‑Driven Reviews with Tech and 360‑Degree Feedback

Bias and inconsistency are major reasons employees distrust reviews. Leading organizations address this by making performance evaluations more objective and data‑driven. One way to do this is through 360‑degree feedback, which collects input from peers, direct reports and other stakeholders. More than 85% of Fortune 500 companies use 360‑degree feedback in leadership development. However, as B2B Reviews notes, only two in five organizations have adopted 360 feedback, and many still rely solely on downward evaluations. This gap suggests an opportunity for companies to differentiate themselves by adopting broader perspectives.

In addition to 360 feedback, organizations are leveraging technology and analytics to reduce bias and improve transparency. Performance management software can track goals, document feedback, and highlight patterns that might otherwise go unnoticed. A significant number of companies (58%) still use spreadsheets for this, but businesses that adopt AI tools are twice as likely to succeed in continuous performance management. Many HR leaders see the promise of AI: Business Insider reports that 75% of knowledge workers worldwide use AI in some form, and when Oracle trialed an AI‑powered review, 89% of employees were willing to adopt it. AI can help flag potential bias in written feedback, suggest more objective language and provide prompts for equitable evaluations, but human judgment and empathy remain essential.

Bias reduction also depends on training. Adobe invested heavily in teaching managers how to have fair and constructive conversations when they rolled out their Check‑In process. Similarly, companies like Deloitte and Accenture ensure that managers focus on strengths and future potential rather than past mistakes. When reviews are informed by multiple perspectives and supported by data, employees are more likely to trust the process.

Clear Goal Alignment and Purpose

Successful performance management isn’t just about feedback frequency, it’s also about aligning individual goals with the organization’s mission. When employees know how their work contributes to broader objectives, they have a clearer sense of purpose. Betterworks’ research reveals that employees who see how their goals fit the organization’s priorities are 3.5 times more likely to be engaged, yet only 44% strongly agree that their goals align. B2B Reviews adds that 47% of employees don’t know what’s expected of them, highlighting the importance of explicit goal‑setting.

To address this, many organizations are moving away from static annual goals toward agile goal‑setting frameworks, such as Objectives and Key Results (OKRs). One study of OKR usage found that 75% of companies using the framework ensure that corporate strategy is their primary reference point and 70% reset objectives each quarter. B2B Reviews confirms that 75% of multinational companies now use OKR‑based systems. These short‑term goals allow employees and teams to adapt quickly when priorities change. Mid‑market organizations can adopt similar practices by setting quarterly or even monthly goals that connect to the company mission. Regular check‑ins then focus on progress toward these goals, ensuring the discussion is meaningful and outcome‑oriented.

Furthermore, involving employees in the goal‑setting process increases commitment. Employees who participate in defining their own goals often feel a stronger sense of ownership and are more motivated to achieve them. This collaborative approach also helps managers spot obstacles early and provide support.

Fostering a Feedback‑Rich Culture

At the heart of modern performance management is culture. High‑performing organizations build cultures in which feedback (both positive and constructive) flows freely in all directions. Rather than waiting for formal review cycles, employees and managers exchange insights regularly. B2B Reviews notes that over 50% of employees believe recognition would boost engagement, yet recognition remains underused in many organizations. By normalizing praise for good work and celebrating small wins, companies strengthen morale and reinforce desirable behaviors.

Two‑way feedback is also critical. Adobe’s post‑Check‑In surveys show that 78% of employees feel their managers are open to feedback. When managers solicit input about their own leadership and remove the fear of speaking up, trust deepens. This practice is especially important in mid‑sized organizations, where relationships are more personal. Managers should ask, “What can I do to support you better?” and listen to the answers.

Building a feedback‑rich culture requires investment in manager training and systems that make feedback easy. Many managers are not naturally skilled at delivering difficult messages or drawing out honest conversation. Programs that teach active listening, empathy and bias awareness can help. Software tools can facilitate real‑time recognition, peer feedback and anonymous suggestions. Without this cultural shift, even the best tools will not transform performance management.

Turning Performance Management into a Growth Driver

The evidence is clear: the old approach to performance management is failing employees and companies alike. Traditional annual reviews are demotivating, inefficient and often unfair. By contrast, organizations that adopt continuous feedback, development‑focused coaching, data‑driven evaluations, agile goal alignment and feedback‑rich cultures are thriving. Studies show that companies focused on effective performance management are 4.2 times more likely to outperform their peers and achieve 30% higher revenue growth. They also experience lower regrettable attrition and higher engagement.

For HR professionals , the path forward is both clear and urgent.

• Start by replacing annual reviews with regular check‑ins that emphasize coaching and development.
• Train managers to give constructive, bias‑aware feedback.
• Invest in performance management software and consider AI‑assisted tools to enhance objectivity and reduce manual workload.
• Align goals clearly with company strategy, using frameworks like OKRs to keep objectives current and measurable.
• Finally, cultivate a culture where feedback is encouraged, recognition is routine and employees feel safe sharing their ideas and concerns.

By embracing these practices, organizations can transform performance management from a bureaucratic exercise into a strategic advantage. The payoff is better engagement, lower turnover, faster adaptation and ultimately superior business results. Now is the time to reimagine performance management, not as an annual event, but as a continuous engine for growth.

Image credit: Photo by Mike Kononov on Unsplash