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Why Performance Reviews Matter

Posted by A.N. Argas on 1 May 2017

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 What's trending isn’t always what’s best.

By the end of 2015, at least 30 of the largest companies in the world had moved away from the performance review logic. Ongoing or real-time reviews have replaced the annual and semi-annual performance review. The logic behind this shift is that managers get an ongoing insight into an employee’s contribution to the company, rather relying on an annual check in. Ongoing reviews tend to be less formal and more colloquial in terms of process and review compared to the standard formal performance review.

So how have these companies done without performance reviews?

The fallout has been far from positive. One study, in particular, found that perceptions of the quality of conversations with managers fell by 14% after reviews and employee performance was generally 10% lower in organizations without performance reviews.

While performance reviews are notoriously disliked, the shift to ongoing reviews has been negative enough for tech giant Facebook to keep performance evaluations. It’s not just management choosing to keep them around either, 87% of their employees requested to keep performance ratings in place.

An issue with replacing the structured performance review with informal reviews is it introduces the potential for bias into the review process. Managers who have a better rapport with some employees can provide a more in-depth ongoing review compared to employees who they are not as close with. A manager with more time available can also dedicate more energy to regular reviews and catch ups compared to managers who have less time to review employees. When there is no structured review in place, the way performance is evaluated becomes dependent on the time and relationship that a manager has with an employee, this gives an unfair advantage to some employees who may get more feedback or a better quality of feedback.

Informal reviews remove a universal rating system which doesn't let employees see where they sit within an organization. A part of managing people effectively is to recognize their performance and let them see how their contributions have impacted on an organization. Behavioural Economist Daniel Kahneman worked with the Israeli army to evaluate hundreds of cadets and found that a global rating of overall performance was very functional in evaluating performance, provided there was a structured process in place.

Another issue with the ongoing reviews is that too many conversations with managers about performance and professional growth cause people to get overwhelmed. Constant feedback can lead to employees often struggling to figure out what information is material and what isn’t. An analysis of 607 studies found that over 33% of all feedback interventions were not effective and ended up decreasing performance.

So what’s the solution?

The standard performance review is far from perfect. With surveys showing 95% of managers regarding their performance management system in a poor light and 75% of employees saying they don’t get good performance review feedback.

The solution does not lie with completely doing away with performance reviews but instead focusing on improving them with a global standard, a standardized review process, and transparency within the review process. While you can’t please everyone, people are more likely to accept a review when the process is conducted fairly.

Performance reviews shouldn’t be discarded but developed. Assessment should be done around the work produced over a period of time, recognizing contributions and growth. New research has shown that 66% of people receive a different performance evaluation from one year to the next.

The best way forward is to develop a system that fosters productive conversation. 

 

The first step to good performance is having the right employees. Click below to get our guide to hiring.

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Topics: candidate, employer