How to increase the ROI on employee performance plans

Performance plans, also known as development plans or performance reviews, can provoke strong reactions in leaders and employees. They can be seen by some as powerful tools for improving productivity and nurturing growth, while others see them as a bureaucratic waste of time.

When done well, performance plans benefit the workplace, but when poorly executed, they can undermine morale and stifle innovation.

So how do leaders get it right? 

Make performance reviews part of an ongoing conversation

Most people dislike performance management because they believe it is ineffective. The results of Deloitte’s 2025 Global Human Capital Trends report show that 61 per cent of managers and 72 per cent of workers could not say that they trust their organisation’s performance review process.

The Deloitte research also notes that using traditional performance plans — based on an annual review — as the single tool for assessing employee output is unrealistic. It is a sentiment that Shelley Johnson, leadership coach and founder of HR company Boldside, agrees with.

“Performance reviews can be effective if they’re part of an ongoing conversation rather than an annual event or a tick-and-flick management exercise,” she says. 

A McKinsey study shows that without any development conversations, only 21 per cent of employees surveyed were motivated by the performance process. When they receive regular check-ins however, that number jumps to 77 per cent. 

“Managers who invest in regular, ongoing check-ins with employees, where they provide feedback and coaching, see an immediate lift in ownership, engagement and performance. But, when we leave it too long between conversations, engagement drops,” Johnson says.

“The critical part is the ongoing conversation. It is less about the formality, forms and bureaucracy, and more about creating space for open, two-way dialogue about how a team member is growing, developing and achieving expectations.”

Prioritise taking the time to provide feedback

The time it takes to go through the performance plan process is an often-cited criticism. Despite the evidence demonstrating how productivity and retention can improve when feedback is given consistently, it is still sometimes seen as a laborious task that is not worth the effort.

Craig Allen FCPA, director and founder of The Remote Accountant, disagrees.

“Practices are under pressure, and it is easy not to prioritise the time it takes to manage a team and give people the feedback they need,” he says.

 

"The performance plan means managers have a way to give honest assessments of their team’s performance, skills and attitude, which is critical. But it goes both ways. It is also important for employees to identify where they want to develop their skills and things they’re struggling with."

 

“It is so important though. I recently worked with an accounting business that was generating low fees and productivity each month. We were able to help them achieve a dramatic financial turnaround just by giving the team some feedback and guidance on their performance.”

What makes a performance plan effective?

Historically, performance plans were rooted in accountability and linked to remuneration and other rewards. Just as workplaces change and evolve, the strategies for monitoring performance also change. 

Rigid annual reviews are slowly being phased out and the focus is shifting to nurturing employee growth through iterative conversations, frequent goal setting and investing in managerial coaching rather than simply rating past output, says organisational psychologist Dr Penelope Faure. 

“Ensuring that specific targets were met was traditionally linked to remuneration, which was assessed once a year,” she says. “That is still common in many larger organisations, but it is starting to change.”

Businesses are now also becoming aware that a “one-size-fits-all” approach is not nearly as effective as tailoring performance plans to the individual.

 

"There is no single universal model that applies effectively across all situations. The hallmark of an effective performance plan is that it is dynamic — an ongoing conversation, not a one‑off, high‑stakes event."

 

“There is no single universal model that applies effectively across all situations. The hallmark of an effective performance plan is that it is dynamic — an ongoing conversation, not a one‑off, high‑stakes event,” Faure says.

“This is particularly true for younger generations who otherwise may see performance management as a very bureaucratic process that is essentially ineffective,” she adds. 

Organisations are also increasingly incorporating behavioural goals linked to their core values into performance management — focusing not just on what employees achieve, but how they behave, Johnson says.

“It reflects how an employee embodies the cultural identity of the business, as well as how well they perform the more technical functions,” she says. 

An important tool for both managers and employees

Performance plans not only give employers an opportunity to make sure employees are being held to account, but they can also help with employee retention and growth.

Companies with a strong learning culture — where development plans are integrated with performance management — achieve 30 to 50 per cent lower turnover. Continuous performance systems further enhance retention by 44 per cent.

Having a clear performance process is also invaluable when working with team members who are new to a business, Allen says.

“We do extensive performance planning and reviews to help someone reach the level they need to be at once a probation period has finished,” he says.   

“The performance plan means managers have a way to give honest assessments of their team’s performance, skills and attitude, which is critical. 

“But it goes both ways,” he adds. “It is also important for employees to identify where they want to develop their skills and things they’re struggling with.”