Are your annual reviews just a history lesson or focused on future capability?

For many of my clients, the end of the financial year signals annual performance review time.

Over the years, I’ve seen countless annual performance reviews. And in my experience, the ones that are truly effective go beyond just looking backwards.

They focus on clarifying an employee’s career aspirations, identifying the gaps between current capability and the knowledge, skills and experience required for future roles, and developing a targeted development plan to bridge the gaps.

These discussions, when done with a genuine intention to support the employee’s growth and progression, are a win for the employee, the team and the business.

So, how do I help small business owners and managers to get real value from their review process? 

1. Equip managers to have real conversations: One of my clients explicitly states that their operational managers are the stewards of their employees’ careers.

So, when we prepare to conduct staff reviews, I train and coach the managers in providing feedback and conducting development conversations. We include time for skills practice and planning development activities, so they’re truly prepared for the meeting with each team member. 

2. Dedicate time to development: In my experience, if it’s not explicitly planned, it doesn’t happen. That’s why I always advise clients to allocate specific time within the review meeting solely for discussing growth, or to separate the review and development conversations.

I develop review templates that include professional development as a separate section of the review. This clearly signals to the employee, “We’re invested in your future, not just your past performance.” 

3. Everyone prepares in advance: To get true value, employees also need to prepare in advance by reflecting on their career aspirations, skills they want to build, and where they envision their career growth within the company.

I provide example questions like: “What new skills are you keen to develop this coming year?” or “Thinking ahead 2-3 years, where do you see your career evolving?” or “What types of projects would excite and challenge you?” This reflection helps them to prepare for a genuine dialogue.

4. Connect development to organisational and personal goals: It’s important to link individual ambitions to the business’ needs. I coach managers to explain how gaining new skills or responsibilities will contribute to team objectives and the company’s wider strategy, as well as contributing to the employee’s personal career goals. This is truly a win-win: their growth propels the company, and the company provides pathways for their advancement. 

5. Focus on specific, actionable steps: Vague promises of “improvement” just don’t cut it. I work with managers and their teams to define 2-3 clear, achievable development goals.

We get specific: What training is needed? Could they lead a small project or act as a buddy to a new colleague? We define concrete actions and sketch out a timeline.

6. Document and schedule follow-ups: My advice is always to capture these development goals and action items formally in the review documentation. But more importantly, don’t let it gather dust!

I strongly recommend scheduling brief development-focused check-in meetings throughout the year – ideally quarterly. These are vital for discussing progress, tackling any roadblocks, and tweaking the plan if needed. It shows ongoing commitment and keeps that development momentum alive.

By shifting the annual review to include employees’ future growth, you’ll foster a more engaged, skilled, and motivated team.

Although more time-consuming, the conversations and follow-up actions will consistently pay dividends in capability, loyalty, and an in-house talent pipeline. They will turn what is often a dreaded, box-ticking exercise into a truly valuable experience for employees, managers, and the business.