Annual Appraisals Are Broken. Spring Is How You Fix Them.

After 20 years in HR, I've watched various organisations run the same exhausted cycle — and the annual appraisal, as most organisations run it, is one of the most counterproductive rituals in modern business.

Not because the principle is flawed — feedback, reflection, and goal-setting are genuinely essential — but because we have built a fundamentally broken process and then kept running it, year after year, wondering why nothing changes.

I could provide a long list of why this happens but I have picked the top three issues I have personally experienced.

The Pay Problem: When Everyone Scores High, No One Does

One of the most damaging design choices organisations make is tying appraisal scores directly to pay. Whilst the logic may seem sound to reward good performance, it becomes something very different.

I worked for a multinational business some years ago and the overall performance rating was a factor to determine what the level of salary increase was that employees recieved. This meant the conversations between employees and managers shifted. Managers were asked to provide evidence if their rating disagreed with the employees. Equally, employees would argue about the rating not just the overall, but the individual goals, especially if just one tweak would bump the overall rating up.

This results in employees grading themselves as high as they feel they can and the managers agreeing to avoid the conflict. The grade inflation occurs across the board — and if more senior leaders disagree, the managers start to argue with their own managers because they know how it is going to effect employees if the grade is reduced.

However, this is a double-edged sword. If pay is removed the annual appraisal process, it stops becoming a priority. Both employees and managers stop preparing or putting time into the process, it becomes a 'paper' exercise only. HR professionals do nothing but chase for forms or systems to be completed and everyone finds it a drain.

In large organisations:

The stakes are amplified by scale. With hundreds or thousands of employees to assess, calibration sessions are supposed to address grade inflation — but in practice they often become political exercises where the loudest voices and the most senior advocates determine who rises and who does not. HR spends enormous energy managing the process and very little energy on whether it is actually working.

In small and medium businesses:

The problem is often more personal and therefore harder to navigate. When there are fifteen people in a company and the founder is doing the appraisals, tying development to pay becomes entangled with loyalty, personal relationships, and the fear of losing key people in a team where every individual genuinely matters. Many SME leaders avoid the conversation entirely rather than risk the discomfort. The result is a workforce that receives little meaningful feedback and no clear sense of how their contribution is valued beyond their salary.

The Drawer Problem: Goals Set in January, Found Again in December

Here is a scenario every HR professional will recognise. It is January. The appraisal cycle opens. Managers and employees sit down, often under time pressure, and set goals for the year ahead. Promises are made. Development areas are identified. A form or system is completed, signed off, and filed.

Eleven months later, the cycle opens again. The form is retrieved from the drawer — or more likely, located somewhere in an HR system that nobody has look at since last February. Both parties look at what was written and try to remember what they were thinking at the time. The goals that seemed meaningful in January now bear little resemblance to what the business actually needed, or what the employee actually did.

This is not a people failure. It is a process failure. Annual goal-setting assumes that the world stays still for twelve months. In a fast-paced business, it never does. Priorities shift, strategies change, teams restructure, and the goals on that form become fiction almost as soon as they are written. No-one is every going to spend their time constantly updating them, once they are completed the process is done!

In large organisations:

Goals set at the start of the year are frequently obsolete within two quarters. Business strategies shift, restructures happen, new priorities emerge from the executive team — and yet the appraisal process grinds forward on its original timetable, assessing people against objectives that no longer reflect what they were actually asked to do. The disconnect between the appraisal form and operational reality is often so wide that both managers and employees treat the whole exercise as a formality to get through rather than a conversation worth having.

In small and medium businesses:

The drawer problem is, if anything, worse. SMEs typically lack a dedicated HR function to maintain oversight of development plans between cycles, so there is no one prompting managers to revisit goals mid-year, no system flagging that a check-in is overdue, and no accountability for whether the promises made in the appraisal were ever followed through. In a small business, the pace of change is often faster than in a large corporate — roles evolve constantly, people wear multiple hats, and the job someone was doing in January may look completely different by October. An annual review cycle simply cannot keep up.

The Admin Problem: HR Spends More Time on Compliance Than Outcome

There is a deeply uncomfortable truth that sits at the heart of most performance management functions: the majority of HR's time and energy in an appraisal cycle is spent on administration — chasing completion rates, troubleshooting system issues, managing escalations, and producing reports for senior leadership — rather than on the quality of the conversations happening in those meetings.

We measure what is easy to measure. Completion rates. Rating distributions. Sign-off timelines. These metrics tell us whether the process was administered. They tell us almost nothing about the quality of the conversations and how employees and managers felt once the appriasal was completed.

A department where 95% of appraisals were completed on time and every employee scored a three out of five has, by most HR reporting standards, had a successful cycle. A department where a manager spent three genuinely transformative hours with a struggling employee, helped them reframe their career, and agreed a meaningful development plan — but filed the paperwork a week late — is in trouble because of the deadline being missed.

In large organisations:

The administration burden is significant. Large HR teams can spend weeks managing the mechanics of a global appraisal cycle — tracking submissions across regions, managing exceptions, fielding queries from managers, and compiling data for the executive team. By the time the cycle closes, the energy available to ask whether any of those conversations actually improved anything is close to zero. The process has become the point, rather than the development it was designed to enable.

In small and medium businesses:

The admin problem manifests differently — not through complexity but through the absence of any structure at all. Without a dedicated HR function, the administration of appraisals often falls to an office manager, a finance lead, or a founder who is already stretched thin. Templates are inconsistent, timelines drift, and there is no one with the capacity or mandate to hold the process together. The result is that appraisals happen sporadically, if at all, and any development value they might have had is lost entirely to inconsistency.

So What Does Good Actually Look Like?

The good news is that none of these problems are unsolvable. They require honest conversations and leaders who are prepared to treat people development as a genuine priority rather than a compliance obligation.

• Decouple development from pay. Run compensation reviews separately. Free the development conversation to be exactly that — a conversation about growth, not a negotiation about money. This applies whether you have ten employees or ten thousand.

• Shorten the horizon. Quarterly check-ins — brief, structured, and consistent — are infinitely more valuable than an annual review. For SMEs, even an informal monthly conversation with a simple structure is transformative compared to nothing.

• Make it proportionate. Large organisations need structured frameworks, calibration processes, and technology platforms to manage development at scale. Small and medium businesses do not. A great development culture in an SME can be built on consistent one-to-ones, honest conversations, and a leader who genuinely knows their people. The sophistication of the process matters far less than the sincerity of the intention behind it.

Why Spring Is the Right Time to Reset

Here is something that is rarely discussion but matters more than most organisations realise - Timing.

The neurological case for spring is straightforward: as daylight increases beyond the equinox, serotonin rises and melatonin declines. People are measurably more open, more motivated, and more cognitively flexible. It is the worst-kept secret — and the most ignored insight in appraisal planning.

Most organisations — large and small — run appraisals in January or at financial year-end, precisely when operational pressure is highest and psychological space is lowest. The spring equinox, around the 20th of March, offers a natural reset: equal light and dark, the beginning of expansion. For a large corporate, it is an opportunity to redesign the cadence of a global process. For an SME founder, it is simply a prompt to sit down with each person in the team and have the honest conversation that has been deferred since last autumn.

It will not fix a broken process on its own. But for organisations of any size willing to do the harder work of taking development seriously, spring is the right moment to begin.