For many people, the term performance review conjures up a lot of negativity and even anxiety. This has become a such an issue that many HR pundits have been writing about the pointlessness of the performance review and how it is time to put a stop to them, once and for all.
But done well, performance reviews are really effective. The problem is they’re so often done badly: long-winded, heavily-bureaucratic processes focussed more on ticking boxes than meaningful conversations between managers and employees.
Good performance evaluations boost achievement, increase productivity, and improve morale. This is to everyone's benefit: when employees achieve, so does the organisation, everybody is rewarded (not just financially), skills and careers can flourish, and timely feedback can help identify and manage any problems before they escalate.
To completely ditch such a useful tool would be an overreaction. By understanding and avoiding some of the pitfalls and poor practices we commonly see with performance reviews, you'll be able to ensure your review processes bring value to the company and your employees.
A performance review is a formal, structured assessment of an individual’s work performance and contribution to the organization over a set period of time, e.g. 6 months, 1 year.
The review process involves setting goals/objectives (e.g. OKRs, KPIs), measuring progress towards the goals, and meeting to discuss achievement, areas for improvement, and future objectives.
There are various ways to structure and conduct a performance review, e.g. a rating/score or a more subjective evaluation, but they usually involve input from both the employer/manager and the employee.
In many businesses, performance reviews are used as the primary tool for approving or denying pay raises. Rate an employee's performance of a list of tasks or objectives, tally up the scores, and see if the person has done enough to merit a salary increase or some other bonus.
This may be done in an effort to save time on conducting separate pay and compensation reviews or because that’s the way you’ve always done things.
But even if the performance review process is comprehensive and dynamic, linking it to a pay decision can reduce it to a simple tool for salary negotiations. Employees will see it as a mechanism to get more money while the employer can look to use it as a justification for not giving a raise.
If you keep remuneration discussions separate, you preserve the objectivity of the performance review and ensure it is a powerful tool for evaluating your employee's performance, maintaining open dialogue, and focusing on how you can help people develop their skills.
Our article on separating pay and performance review looks at this issue in depth.
One of the main reasons why many employees and managers have such a bleak view of performance reviews is the burden of all the administration.
It may be because the business has an incredibly detailed review for every staff member, with numerous objectives and complicated rating systems. Or it could be the tracking and compiling of employee successes and challenges takes a lot of time. Then there are the review meetings.
Research by Adobe of 1,500 U.S. office workers found that for every employee, managers spend an average of 17 hours preparing for their performance review. Even for a manager reviewing only a couple of people once a year, that is a lot of time.
If your business is still using a complex, paper-based review system, you could be creating an unnecessary administrative burden and generating a mountain of avoidable paperwork.
This reduces the review process to an ineffectual check-box exercise, rather than providing an opportunity for managers and employees to have a meaningful conversation.
By using an integrated digital platform, you can streamline the process, make it easier for managers and employees to track progress, and get better insight into your people's performance. You'll also provide more immediate opportunities for giving and receiving valuable feedback.
One of the most common failings in performance review processes is not giving employees regular feedback and then unloading it on them during review meetings.
It was the way traditional performance reviews were structured, with minimal collaboration and a rigid focus on what management expected and then judged the employee’s achievement to be.
Saving all feedback until the end-of-cycle review can make an employee feel unfairly blindsided, especially if the feedback is negative. This can leave them feeling alienated and unmotivated, and instead of enhancing their performance and loyalty, you will have damaged it.
Research by global recruitment company Robert Half found that staff would prefer feedback on a more regular basis, either monthly, quarterly, or on the spot.
Providing regular feedback and guidance is far more effective for commending good performance and working on ways to develop talent long-term. It helps shift the focus from past to future, from simple performance review to ongoing performance management.
That feedback doesn't always have to be formal either. Another survey by global analytics and advisory firm, Gallup, found that employees are 3.6 times more likely to be motivated to do outstanding work when their manager provides daily rather than annual feedback.
So don't wait to pass on praise for a job well-done or discuss ways an employee could do better.
Plenty of businesses fall into the trap of having a fixed performance review process that is the same for all employees and all roles.
It might appear to save time and effort but it doesn’t guarantee great results, as it can lock organizations into a review system that doesn't have the flexibility necessary to provide an accurate assessment of each employee's performance or, equally damaging, diagnose issues or areas for improvement.
Review cycles may need adjusting, as the annual review can work well for some roles, but for others that are complex or need flexibility to meet changing customer demand or business requirements (e.g. sales), assessment may be much better on a monthly or quarterly basis.
Similarly, people who are new in a position or not performing to agreed levels may need even more frequent check-ins, which will help give them the feedback and support they need to develop and flourish.
Performance evaluations work best as open, honest conversations. They shouldn't be a one-sided discourse where the boss or manager relays his or her own appraisal of the employee's past performance.
It’s an old-fashioned model, based on rigid hierarchies and dynamics between management and workers. That’s not to say it can’t produce a concrete measure of employee performance, but the employee can feel sidelined and you will miss a prime opportunity to gain better insight into the factors behind outstanding or poor performance, not only any problems a person may be having, but also any wider issues within the business.
Also, when the review turns to looking ahead and setting important goals, if you don't give your employee a chance to provide input, it will be much harder to get their commitment to any goals.
The best performance review process is interactive, working constantly and constructively with your employees. This creates higher levels of engagement and performance, helps develop talent for the future, and improves the company's long-term viability.
There's a surefire way to make performance reviews a fruitless and unpleasant task: make them long and complex.
Again, this is often based on the belief that for a review system to be accurate it has to be exhaustive. But if you are evaluating 20 different performance indicators and each is worth 2.5% of the overall rating, both management and employees will be wasting valuable time on a completely pointless exercise.
There's a reason why the word 'key' is included in Key Performance Indicators (KPIs) and Objectives and Key Results (OKRs). If you assess a maximum of 3-5 KPIs/OKRs that are focused on over-and-above value activities (rather than vague or subjective goals or job basics like arriving on time), you will obtain much more accurate insight into each employee's performance and contribution to the business.
It will also help keep the conversation centred on the possibilities ahead rather than raking over the minutiae or mistakes of the past.
Employee performance doesn't occur in a vacuum. Setting each person's performance targets without considering how their goals will contribute to the company's overall targets could mean your team members' efforts are arbitrary and disjointed.
We see a lot of businesses doing this, either because they haven’t done the upfront work to really define their strategy and targets (and keep them up-to-date), or they don’t understand the close link between employee efforts and company success.
We recommend setting the company's strategy and targets first and every employee's objectives should sit within this strategy, so when individual goals are achieved, the collective results deliver the overall company result.
Everyone in the business should know what they are part of and what they are striving for, so make sure your vision and goals are communicated widely and often. Employee check-ins that are a frequent part of your review system are the perfect time for these discussions.
Also ensure each employee is evaluated on factors they can actually influence. You don't want to penalize a high-performer because others who contributed to overall results failed to deliver. The performer is the one your business needs to keep.