Do Performance Reviews Actually Improve Performance?

Performance reviews are one of the most entrenched practices in the modern workplace. Nearly every large organization has some version of them, whether it’s annual, semiannual, goal-based, or otherwise. In theory, performance reviews exist to help employees improve, but in some cases, they can cause frustration, anxiety, and confusion rather than clarity or growth. This raises an uncomfortable but increasingly common question: do performance reviews actually improve performance?

Why Performance Reviews Exist

At their core, performance reviews were designed to solve multiple problems at once. They’re meant to align employee goals with company strategy, provide structured feedback, document performance for promotion or compensation decisions, and identify development needs.

For managers, reviews create a paper trail. For organizations, they offer a standardized way to evaluate large numbers of employees. When it comes to employees, performance reviews are meant to serve as a sort of “check in” to ensure that they’re on the right track and that their work aligns with what the company is trying to achieve.

When done well, performance reviews can provide clarity, reinforce expectations, and encourage professional growth. The problem is that “done well” isn’t always the case.

Where Performance Reviews Go Wrong

For many employees, performance reviews feel less like a growth tool and more like a test they’re never quite sure how to study for. Keep in mind, a year is a long time, and tying feedback to a single annual conversation can create some problems.

For starters, annual performance reviews can suffer from recency bias. In other words, managers will often only remember an employee’s most recent wins or mistakes. Additionally, the often delayed feedback associated with annual reviews can lead to a slower pace when it comes to implementing said feedback.

Performance reviews sometimes measure output instead of building future potential, so we have to ask ourselves: do they really encourage development? Lastly, performance reviews can be stressful, and employees may feel this “examination” greatly influences their future with their employer, leading to further issues down the line.

Now, it’s possible that these issues aren’t due to the performance review itself, but rather the way some companies frame their reviews, or perhaps the culture surrounding annual performance reviews.

The Psychological Impact on Employees

Performance reviews can unintentionally shift the focus from growth to self-preservation. When reviews are tied closely to raises, bonuses, or promotion decisions, employees may become risk-averse, often choosing “safer” projects over more ambitious ones.

Rather than encouraging honest reflection, reviews can incentivize employees to manage the impressions they make. In other words, they might highlight wins, downplay any struggles they experienced, and avoid conversations that could be perceived negatively. Over time, this dynamic undermines trust and makes feedback far less effective.

This could be particularly true for early-career professionals who may leave reviews feeling discouraged or unclear about how to actually improve.

When Performance Reviews Can Improve Performance

Despite their flaws, performance reviews are still quite useful. They can work when they’re part of a broader feedback culture rather than the sole method of feedback.

Reviews tend to be more effective when they emphasize forward-looking development instead of backward-looking judgement. Conversations that focus on skills to build, experiences to pursue, and support needed are far more likely to lead to improvement than those centered on scoring past behavior.

They also work better when employees know what to expect. Clear goals, frequent check-ins, and transparency around evaluation criteria can reduce anxiety and make formal reviews less surprising (and more productive).

Why Many Companies Are Rethinking the Model

In recent years, some organizations have experimented with moving away from traditional annual reviews altogether. Instead, they’ve adopted continuous feedback models, regular one-on-ones, and project-based evaluations. The goal here is to make feedback more timely and relevant—when feedback is delivered close to the work itself, employees are more likely to absorb it, act on it, and improve.

The bottom line is, this shift reflects a broader recognition that performance improvement is an ongoing process, not something that can be meaningfully addressed in a single meeting once a year.

What This Means for Employees

Whether your company loves performance reviews or is actively trying to reinvent them, employees shouldn’t be passive participants in the process. The most successful professionals seek feedback outside the formal performance review cycle, ask questions, and focus on patterns rather than isolated incidents or comments.

Documenting accomplishments, tracking progress on goals, and requesting specific examples can also help employees turn performance reviews into more useful conversations.

So, do performance reviews actually improve performance? Sometimes, but it’s less consistent than most organizations probably assume. In most cases, performance reviews are better at documenting performance than developing it. Real improvement happens through regular feedback and managers who are willing to coach, not just evaluate.

Rob Porter is an editor at Vault.