If you have worked for any company in the last century, or since the third century for that matter, you have very likely participated in some form of performance review. Traditionally, this has been an annual formal evaluation of an employee’s documented job performance. It is also likely you dislike this outdated but widely-used institutional practice.
A headline by the Washington Post describing a 2013 study by psychologists at Kansas State, summed it up quite clearly: “Study Finds That Basically Every Single Person Hates Performance Reviews.”
It’s Time to Review the Reviews
Performance review systems are a necessity in most companies. There needs to be some method for developing and cultivating star performers, as well as coaching or encouraging improvement to the underachievers. Managers and employees both have their reasons for disliking the traditional appraisal process, for example;
- There is a known rater-bias in traditional performance reviews
- Performance reviews do not ultimately change bad behavior
- Unless a review is 100% positive, both the manager and the employee are likely to leave the meeting with a bad feeling
Derek Thompson, Senior Editor at The Atlantic, describes a “rater bias” where “employers tend to hire people they expect to like. They expect to like people who are similar. And they’re more likely to rate people higher if they hired them” and lower if they are “different from the boss.”
A related problem is review systems often suffer from “grade inflation” where managers have an incentive to give their team members good scores as it reflects directly on their management capabilities.
Graham Kenny, in an article for the Harvard Business Review, describes how most performance reviews focus on an individual’s activity, not the outcome of their work. As an example, a receptionist might be evaluated on how many telephone calls she or he handles per day, as opposed to looking at how happy clients are with their interaction.
The mental repercussions of the appraisal process are another issue. As pointed out by Chana Schoenberger in the Wall Street Journal, researchers at the Neuroleadership Institute concluded in 2014, in the journal Strategy + Business, that the very act of giving employees a rating jolts them into a “fight or flight” scenario, and that while “the employees may not say anything overtly, he or she feels disregarded and undermined, and thus intensely inclined to ignore feedback, push back against goals and reject the example of positive role models.”
As Derek Thompson writes in The Atlantic, “If each employee of a company deserves a rigorous evaluation to determine his or her performance and place in the company, the exhaustive evaluation process, itself, deserves a similarly rigorous performance review.”
Some companies have been tinkering with performance reviews for years and have started to take a good hard look at their means of evaluating their employees.
Major U.S. companies such as Accenture, Adobe, Cigna, Gap, IBM, Deloitte, Microsoft, Medtronic, and Netflix are abandoning the annual performance review, in favor of a modified appraisal processes. Adobe implemented a more informal “check-in” process throughout the year, where employees receive “feedback on what they’re working on at any given moment,” according to Vauhini Vara, former business editor for The New Yorker. Additionally, she states that Deloitte replaced its “laborious annual process” with a set of questions to be answered by managers after every project where the answers are used to “influence how the company helps promising employees advance and helps troubled ones get back on track.”
Even General Electric, long seen as the “bellweather for management practices,” where former CEO Jack Welch promoted the “rank and yank” system in which employees ranking in the bottom 10% were eliminated, has overhauled their system. The company is “experimenting with replacing a once-a-year formal review with more frequent conversations, introducing an app to help employees’ managers and teammates share feedback and testing the idea of using no performance ratings at all.”
Jena McGregor of the Washington Post relays that Corporate Executive Board (CEB) found that a “small but growing 3 percent of companies in 2012 had dropped traditional performance reviews, up from 1 percent in 2011,” and Vaselli relates that in 2016 “nearly 10% of Fortune 500 companies have started the revolution.”
Companies now have more choices when it comes to the performance review process including 360-degree feedback, also known as multi-rater feedback, and objective-based evaluation.
The Performance Review of the Future
If you are conducting reviews the way you did five years ago, it is time to consider the latest trends and best practices and recognize the changing needs of employees today. As higher numbers of millennial's enter the workplace, performance reviews will likely favor more frequent communication and more immediate feedback. Other recommendations for performance reviews:
- Ditch the annual formal review and instead focus on more frequent and informal communications. A performance appraisal should take place in real time and be a conversation over coffee rather than a one sided dialogue in a conference room.
- Plan and think ahead about of the goals of the next performance review you conduct. “What are the key messages you want to convey, what’s the overall feeling you’d like the employee to leave the meeting with?”
- Investigate best practices and trends of your competitors, companies with sophisticated and well run human resource functions. You can also keep abreast through some of the major human resource groups on LinkedIn and SHRM. Finally, encourage your own HR team and internal client groups to be open to innovate.
After all, the goal of performance reviews should be growth and development for the individual, the manager and the company. It’s time for companies to make performance reviews relevant.