Performance Reviews Are Not Exams

The end of the year is traditionally the time when organizations evaluate work performance and plan employee development for the year ahead. Recent trends show growing dissatisfaction with performance evaluation - both among employers and employees. Employers often see the process as bureaucratic and lacking meaningful impact, while employees feel that the evaluation is unfair. Much of this dissatisfaction stems from a misunderstanding of the purpose of performance reviews and a deeply rooted perception that evaluation is a form of criticism - the belief that “if I’m being evaluated, I must have done something wrong.” But is performance evaluation truly just a stressful administrative task? Could development conversations replace formal assessments and reduce employee anxiety? And what would such a shift mean for employers?

According to McKinsey & Company, 95% of managers are dissatisfied with their current performance management systems, 90% of HR professionals believe that evaluations fail to reflect real employee contributions, and two out of three employees feel that the process is not fair or consistent. This raises a crucial question: if almost no one is satisfied with the current approach, where is the value?

New Standards in Performance Evaluation

There is value - but only when all parties understand that the process must be focused on employee growth, team development, and organizational success, not on inspection or punishment. The perception of performance reviews as an “exam” that requires last-minute preparation must be left behind. Traditionally, the review occurred once a year, goals were set, feedback was given, and the process was shelved until the next year. However, the modern workplace has changed — and new standards are emerging.

More Frequent, Skills-Focused, and Goal-Aligned

First, current best practice suggests evaluating performance quarterly, supported by ongoing feedback enabled through digital tools. Many organizations now hold regular 1:1 conversations (15–20 minutes weekly or bi-weekly) between managers and employees. Teams that adopt this practice see employee engagement rise by nearly 40% and turnover decrease by nearly 30%. In larger organizations, these conversations can also be led by team or unit leaders. Second, the focus has shifted from job titles to skills. What matters most is not the position someone holds, but the capabilities they demonstrate. Modern organizations evaluate and hire based on skills, not only prior experience. Third, individual employee goals should be clearly aligned with organizational objectives - a principle known as OKR (Objectives and Key Results). When goals cascade clearly from organizational strategy to team and individual levels, every employee understands how their contribution matters to the larger picture.

From “Performance Review” to “Development Conversation”

The success of performance evaluation depends heavily on leadership. Managers must understand - and communicate - that the purpose of performance management is growth, development, and well-being, not punishment. The very term “performance review” triggers stress. Across Europe, many organizations have already replaced it with “development conversations”, which shifts the tone toward forward-looking progress rather than judgment. This approach also encourages employees to propose their own development goals - which significantly increases engagement and accountability.

Well-Being as a Performance Factor

Increasingly, organizations recognize that employee well-being is a critical performance driver. Well-being includes emotional and psychological balance, professional development, financial security, and a healthy work-life rhythm. Research shows that employees with high levels of well-being demonstrate 20% higher performance, take 40% fewer sick days, and are 66% more engaged. In other words - well-being is not a “nice-to-have”; it directly affects organizational outcomes.

The Importance of Meaningful Feedback

Another challenge is the culture of giving and receiving feedback. In Latvia, people tend to avoid both praise and open discussions about difficulties. Evaluations often result in neutral, vaguely positive scores without explanation. This leads to a lack of clarity about strengths and areas for improvement, making it harder to support performance and development. Therefore, it is essential to foster a feedback culture where input is both honest and respectful - acknowledging achievements while constructively addressing growth opportunities.

Performance evaluation - or more accurately, development conversations - are not exams. They are a foundation for long-term collaboration, trust, and growth. When goals are aligned, well-being is supported, feedback is ongoing, and conversations are conducted respectfully and regularly, performance evaluation becomes a positive and meaningful development tool rather than a source of stress for employees and managers alike.