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The future of performance management is less about a single annual rating and more about a continuing system: clear objectives, timely feedback, useful development conversations and periodic formal reviews. AI may help organise information or prompt better coaching, but people still need to interpret the evidence, explain decisions and ensure the process is fair.
What performance management includes
Performance management is the broader system an organisation uses to align work with its priorities and help employees contribute and develop. An appraisal is one component, not the whole system. Depending on the organisation, the system can include objectives, regular feedback, learning and development, formal reviews, ratings and performance-related pay. CIPD’s performance management factsheet, dated 29 January 2026, describes these elements and says practice should be suited to the organisation’s context.
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That distinction matters: changing the annual review form does not necessarily change how performance is managed. The future-facing question is whether the full cycle helps people understand expectations, respond to changing priorities and improve their work.
Why the annual-only model is changing
Annual reviews can provide a useful point to look back, assess progress and agree development. But when they are the only substantive conversation, feedback may arrive too late to guide the work it concerns. CIPD describes a shift away from annual-only appraisals and process-heavy forced ranking toward more frequent reviews and higher-quality, often coaching-style conversations. Its guidance calls for feedback that is regular, timely and focused on improvement, and objectives that can evolve as business priorities change.
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Gallup likewise argues that frequent, honest feedback can make formal progress reviews more consistent with what employees have heard throughout the year. In its discussion of performance evaluations, Gallup estimates that an organisation of 10,000 employees could lose $2.4 million to $35 million in working hours annually through the evaluation process. That is Gallup’s estimate for its stated scenario, not a measured cost that applies to every employer. Its underlying question is a practical one: “Why do we do this in the first place?” Organisations should be able to explain what each review step is for and whether it helps employees and the business.
What a more useful system looks like
Objectives that stay connected to the work
Objectives provide direction, but they lose value when the work or business priorities change and the goals remain fixed. A more adaptable system makes it possible to revisit objectives as circumstances shift, while keeping a record of what changed and why. The aim is not constant goal rewriting; it is to keep expectations relevant and understandable.
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Feedback close to the event
Regular conversations give managers and employees a chance to address progress, barriers and support needs before they become end-of-year surprises. Feedback should be specific enough to guide improvement and timely enough to be useful. Formal reviews can still serve as checkpoints, drawing together the conversations and evidence rather than introducing an entirely new account of performance.
Development alongside evaluation
Performance conversations can support learning and growth as well as administrative decisions such as ratings, pay or promotion. Those purposes can pull in different directions: an employee may be less candid about a development need if the same conversation is primarily experienced as a high-stakes judgment. Organisations should be clear about how developmental feedback relates to formal decisions, and avoid implying that one meeting can do every job equally well.
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- Author: Bungay Stanier, Michael.
- Publisher: Page Two
- Pages: 244
- Publication Date: 2016-02-29
- Edition: 1
Managers equipped to do the work
A process depends on managers having time, relevant information and the skill to conduct constructive conversations. Software can schedule check-ins or collect input, but it cannot supply context or take responsibility for a decision. SHRM’s discussion of AI coaching reports that 43% of HR professionals said managers were insufficiently prepared to conduct effective reviews and 60% said managers lacked data-driven insights; the article excerpt does not establish the underlying survey year and sample, so these figures should be read as SHRM-attributed findings rather than universal measures. CIPD’s UK Good Work Index 2025 release also highlights the importance of line managers to employee wellbeing.
Where AI may help—and where it should not decide
AI may support feedback workflows, employee development and manager coaching by surfacing patterns or suggesting prompts for a conversation. SHRM reports, attributing the figure to its 2024 Talent Trends report, that 46% of organisations deploying AI tools for performance management use them to facilitate employee goal setting. This describes a use among organisations deploying these tools; it is not a share of all employers or proof that the tools improve performance.
AI-generated signals are not the same as a fair or accurate assessment. SHRM identifies risks including bias, unfair outcomes, surveillance concerns and flawed automated recommendations, and points to governance, audits and human review as safeguards. Employees and managers should be able to understand what information is used and how it affects decisions. A person should remain accountable for interpreting context, questioning questionable recommendations and explaining consequential judgments.
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Outbyte Driver Updater FREEFix the driver behind crashes, sound loss and screen glitchesFind Drivers →Outbyte PC Repair FREEClear out junk files and repair common Windows errorsFree Scan →Manager support also matters when AI changes how work is done. Gallup’s 2026 State of the Global Workplace report found that, among US employees in organisations investing in AI, those who strongly agreed their manager actively supported AI use were 8.7 times as likely to strongly agree that AI transformed work and 7.4 times as likely to strongly agree that AI created more opportunities to do what they do best. These are associations based on self-reported agreement, not evidence that manager support caused those outcomes. Gallup also reports that fewer than a third of US employees in organisations implementing AI strongly agreed their manager actively supported its use. In the UK, CIPD’s 2025 release says 16% of employees reported that tasks had been automated using AI, typically repetitive tasks. These findings illustrate different contexts; neither establishes that AI should rate an individual’s performance.
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How to choose an approach for your organisation
There is no universal best cadence, rating policy or review format. CIPD recommends fitting practices to organisational context. Before changing a system, consider the work employees do, how quickly priorities move and what the organisation needs its performance process to achieve.
- Cadence and flexibility: Will regular conversations make feedback more useful, and can employees’ objectives be updated when priorities genuinely change?
- Purpose: Is the process intended to support development, make administrative decisions such as pay and promotion, or both? Make the relationship between those purposes clear.
- Manager capacity: Do managers have the time, training and evidence needed to hold constructive conversations?
- Transparency and trust: Can employees understand the criteria, evidence and role of any automated tools, and can they challenge or add context to an assessment?
- Fit with roles: Does the approach suit the work being assessed, rather than applying one rigid process to jobs with different responsibilities and outcomes?
SHRM frames performance management as a system for aligning employee performance with business objectives and identifies data-informed, personalised insights as a trend. A trend is not proof that a specific technology or policy produces better outcomes. Organisations should judge any change by whether it makes expectations clearer, conversations more useful and decisions more accountable.
What is likely to endure
Tools and review formats will continue to change, but performance management still requires people to agree meaningful expectations, discuss work candidly and act on what they learn. Continuous feedback is not a demand for constant monitoring; it is a way to make support and course correction part of normal work. Formal reviews can remain valuable when they consolidate that work instead of serving as its only record. AI can assist the process, but accountability, context and fairness remain human responsibilities.
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