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Companies increasingly understand the limitations of the traditional annual performance review. Generally speaking, such reviews involve one boss assessing their employees’ progress over the last 12 months — which, depending on how hands-on that manager is, usually doesn’t provide a complete picture of a year’s worth of work.

To provide better feedback for their employees, some organizations have started using 360-degree performance reviews. These reviews include feedback from managers, colleagues, subordinates, and even customers. They also require employees to evaluate their own performance themselves.

While 360-degree performance reviews certainly have their limitations, they also provide companies with a number of benefits. These include:

Research supports what managers and employees have known for some time: that the annual performance review process is broken. Results from the Brandon Hall Group’s 2015 research survey indicate that, although 88 percent of organisations have a performance management strategy, 71 percent view it as ineffective. Since there is no doubt that organisations need a process for evaluating and improving employee performance, attention must turn to transforming the strategy to address negative perceptions by employees and managers and to more closely align it to changing business needs. Here are five best practices that can help to transform the annual performance review into a dynamic, employee-centered strategy, focused on aligning the entire workforce toward organisational priorities.