How to Change the Performance of Your Performance Review Systems

Are performance review systems broken? According to one report, the answer is yes.

A 2025 Corporate Performance and Learning Survey by Acorn, an HR technology company, found only 29% of surveyed workers trust how their organization evaluates performance. The survey included responses from 1,239 U.S.-based full-time workers, spanning executives, managers and individual contributors across HR, learning and development, and business teams.

The research also uncovered a consistent gap between how typical performance systems are perceived by those who implement them versus those who are graded by them. While 66% of polled executives report confidence in their performance management tools and frameworks, and believe the resulting metrics are fair, only 19% of individual contributors say the same.

“The problem is these organizations are flying blind,” said Keith Metcalfe, the president of Acorn, noting that many employers don’t have the programs in place to identify or grow skills, so they are likely unable to create real career paths or development opportunities for their employees.

As a result, employers are at risk of having good talent walking out the door. “When someone wants to grow and their bosses don’t have the resources to help them, they leave,” Metcalfe said.

The article discusses how total rewards (TR) professionals can address their performance review programs and processes before employees start looking for the exit.

Negative Experiences

The majority of senior leaders in the Acorn survey acknowledged that employees likely need to leave to advance their careers. In fact, the data showed nearly 80% of senior leaders admit employees must exit the organization to get promoted or earn higher pay, and 48% identified the lack of integration between performance management, learning or talent systems as the culprit.

According to Jennifer Loftus, a national director at compensation consulting firm Astron Solutions, poorly viewed performance management programs and processes can lead to employees and managers with a lack of trust in the TR/HR function, compensation systems and pay for performance — especially if the reviews are tied to low raises or if there is a perception of management “gaming” the system to impact pay increases.

For example, if employees and managers perceive performance management as a “total rewards project” and a policing tool rather than a corporate-wide positive initiative, it can diminish their relationship with the TR/HR team and create fear of the TR/HR function, Loftus said.

She added the standard process can be “very awkward” for both employee and manager when it’s not supported by daily feedback and communication.

“Performance management can lead to hard conversations, which many individuals try to avoid, especially if it’s been several months or a year since [the last review],” Loftus said.

‘From Control to Enablement’

To improve the performance review process, consider shifting the organizational mindset from control to enablement, said Jamie Aitken, the vice president of HR transformation at Betterworks, a performance management software company.

“That means replacing rigid annual reviews with lightweight, frequent check-ins that focus on growth, coaching and clarity,” she said. “It also means giving employees visibility into goals, space to recharge and recognition that reflects real impact — not just hours logged. When we prioritize output over input and make development part of the everyday, we unlock stronger performance and more engaged teams.”

Additionally, a few simple changes to the review process can improve it, said Bobby Melloy, the regional director of people science at Culture Amp, an employee experience platform.

He advised employers to use performance management tools with detailed questions, focusing on observable behaviors — not simply personality — for better feedback and to equip managers to handle tough conversations with genuine care for employee development.

“Clear rating scales and process overviews also drive positive attitudes toward performance systems,” Melloy said. “Ultimately, a better performance process starts much earlier with consistent one-on-ones, purpose-aligned goal-setting and real-time feedback that makes outcomes unsurprising.”

AI as a Solution

Eighty-nine percent of the surveyed respondents in the Acorn study said they are open to solutions powered by artificial intelligence (AI) to repair broken performance review systems. A separate Betterworks survey found that when AI is added into the review process, 89% of managers and employees reported high satisfaction, compared to only 40% of all employees who didn’t have AI integrated.

By utilizing AI toward performance management, the process transforms from a manual process into “a strategic powerhouse,” said Aitken.

“By automating administrative tasks and surfacing insights across the employee lifecycle, AI gives managers more time to coach and empowers HR to take action earlier,” she said. “It also enables more personalized development at scale, helping people build skills and grow in real time.”

AI also may increase organizational efficiency by helping track and capture employee performance in real time, said Melloy, adding that writing and feedback assistance is helping make performance reviews faster and more objective.

“More feedback inputs can be handled at once and synthesized with less bias,” he said, noting how his company recently created an AI-powered “coach” to help employers navigate feedback, difficult conversations and employee well-being.

But organizations don’t need to wait for a complex solution, said Metcalfe.

“We need simple-to-use systems that help people understand what they’re good at, what they need to improve on and how to get them [at their best],” he said. “That’s how you keep great people instead of watching them walk out the door.”

Editor’s Note: Additional Content

For more information and resources related to this article, see the pages below, which offer quick access to all WorldatWork content on these topics:

• Employee Compensation
• Employee Recognition
• Organizational Performance
• Workforce Engagement