Time’s up on the formal performance review.
The most expensive, least effective, HR process you still run.
Today’s workplaces move fast. People expect genuine connection, and AI is transforming how we work, learn, and communicate. While many HR practices have evolved, others remain stubbornly stuck in the past.
Among the most entrenched practices is the decades old performance review, relied upon as a cornerstone of people management. Yet three things remain universally true: they are still widely used; overwhelming despised; and demonstrably ineffective.
Yet the process endures, even though emotionally intelligent leaders consistently show that when honest conversations happen in real time, all the time, performance management becomes organic rather than constrained by an arbitrary process.
The case for change
In 2023, I wrote an article explaining why I’d scrapped performance reviews in every organisation where I led HR, starting some 15 years ago. You can read it here. In that piece, I said that some entrenched HR practices simply need to die and this is one of them.
The traditional review process has turned what should be a developmental exchange into a ritual of politics and paperwork. The research I cited back then already showed its flaws, yet 25 years later, many organisations remain stuck. Why? Stubbornness? Habit? A fear of change and innovation?
When I replaced reviews with a framework for ongoing, purposeful conversations, it felt radical at the time. It took intent, discipline, and training, but it worked. This alternative kept leaders close to the pulse of performance, behaviour, and better at building trust.
A broken process everyone knows is broken
Every year, new research confirms what we already know, the formal review process doesn’t work.
Forbes and Harvard Business Review write on the topic frequently citing statistics such as; 95% of managers say they get no value from their organisation’s performance management system, and; 90% of HR leaders believe formal reviews don’t accurately reflect contribution. Instead of driving performance, the process drives disengagement, anxiety, bias, and avoidance.
They are rarely timely and almost always focused on the past when the only performance that matters is what happens next.
And despite HR’s attempts to ‘modernise’ the process through digitisation, the ROI hasn’t improved. In fact, it has gone backwards. HRIS platforms that promise to make the process easier have instead made it colder, more transactional, and even further removed from critical leadership engagement. Efficiency does not equal effectiveness. The real opportunity isn’t to find short cuts to managing formal reviews, it’s to abolish them altogether.
The biggest flaw is the requirement to manage performance through a rear view mirror. Judging people on the past, when there’s no opportunity to influence, correct, or learn in the moment, is deeply problematic. It reduces mistakes to evidence against someone, not catalysts for growth.
Layer on top the rating process itself: arbitrary, subjective, often delivered by untrained leaders, and inherently vulnerable to bias. Labels become shorthand that follow people around, demotivate them, and distort decisions about pay and potential. In too many cases, the process becomes an exercise in justifying a rating rather than inspiring performance.
What about the ROI?
When you look at the numbers, it’s hard not to question the return on investment.
One of our clients estimates that for their ~10,000 employees, the formal process costs around US$3 million annually in time and resources. For a smaller 500 person business, that equates to roughly 5,000 hours of manager, employee, and HR time each year. Earlier research cited that Deloitte estimated it invested 1.8 million hours of time on its annual review cycle, for little return.
Add to that the 30% productivity loss some studies link to disengagement and wasted effort caused by the ineffective process, and the maths no longer adds up.
When leaders could be using that time and resource to coach, develop, and improve performance in real time, it’s worth asking whether the formal review ritual delivers any commercial or cultural return at all.
The AI moment: a symptom of relevance
The clearest sign of the performance review’s obsolescence is the rise of AI written appraisals.
A 2025 TechRadar report found that over 40% of managers now use AI to draft or polish reviews, and employees increasingly use tools like ChatGPT for their self assessments.
AI can summarise notes, structure thoughts, and surface examples, but it can’t build trust, read emotion, or hold a courageous, purposeful conversation. Those are human responsibilities.
If people are outsourcing feedback to algorithms, that’s not innovation, its laziness. It signals how little value the process holds. Formal performance reviews have become so detached from real work, real dialogue, and real leadership that people are willing to let a chatbot handle it, demonstrates the irrelevance to individuals and that says it all.
Emotionally intelligent leaders don’t need formal reviews
In teams led by emotionally intelligent leaders, formal performance reviews simply aren’t necessary because performance conversations are intrinsic.
These leaders are self aware, curious, and empathetic. They connect often and authentically, creating the kind of performance environments where feedback is normal, not feared.
They don’t wait for HR cycles to address issues or recognise great work. They coach in the moment, challenge constructively, and help people grow through ongoing, honest dialogue.
When leaders operate this way, performance becomes a rhythm, not a formal event.
Staying close to performance — not policing it
Emotionally intelligent leaders don’t need to “review” performance because their finger stays on the pulse. They understand their people, the barriers they face, and the conditions required for success. They use a variety of methods for managing the sphere of performance.
They talk about progress and the future frequently. They surface tension early and see feedback as a gift and a fundamental basis of high performance, not a compliance requirement. People have the chance to course correct, they don’t fear mistakes, rather embrace the learning that comes from them, and they don’t fear the consequences of subjective and irresponsible rating methods.
In these environments, the performance review becomes irrelevant, a relic of an era that mistook control for leadership.
Reclaim performance management
Performance should never be reduced to a backward looking, formalised “exclamation point” event. It isn’t a culmination; it’s a continuum. The real work happens in the daily interactions where leaders observe, coach, course correct, and support growth in real time.
Performance management is an everyday leadership behaviour, not a periodic administrative process. The answer is to replace it with something better. HR must lead the shift away from formal reviews toward performance practices that reflect what people need now.
Leadership is a contact sport and it’s high time HR practices caught up.
