Performance review season. Probably not the most exciting time of the year. Yet, most companies have them, some even twice a year ... or more [1]! So let's explore what are performance reviews, why we have them, and what can be a more valuable and inspiring alternative.
What are performance reviews and why do we have them in the first place?
Performance reviews are a process by which an employer assesses an employee's job performance over a specified period of time. The primary purpose of performance reviews is to ensure that employees are meeting their job expectations and contributing to the organisation's success. By providing a formal evaluation process, managers can assess how well employees are meeting their job expectations, identify areas where they can grow, and recognise outstanding performance.
They are an integral part of many organisations' human resources management practices. They usually consist of a self-assessment and a manager assessment of the employee. In some companies, that feedback is complemented by peer reviews and employee reviews of managers. A calibration process usually takes place before the actual performance review conversation between managers and the employees, where consolidated feedback is shared and future goals and expectations are set.
Besides providing a structured way to assess and manage performance, studies have shown that performance reviews have positive effects on organisations [2]. In particular, organisations that implement review cycles see increased engagement and alignment from their employees, which in turn leads to increased performance. Organisations that have performance review processes are 67% more likely to achieve their strategic objectives than those without [3].
The issues with performance reviews
Implementing a performance review process within an organisation is clearly more beneficial than having no performance review process at all. Yet, only 8% of companies believe that their performance management process drives high levels of value [4] and only 14% of employees strongly agree that their performance reviews inspire them to improve[5]. So clearly, something is off ...
Performance reviews can be a source of anxiety and stress for employees, particularly if they are seen as high-stakes or confrontational [6]. They often primarily focus on an employee's individual performance, without taking into account the broader organisational context or team dynamics. This can lead to a narrow view of an employee's contributions and impact. If reviews are only conducted annually, employees may not receive feedback or support when they need it most, which can lead to disengagement and lack of motivation.
Performance reviews also tend to be fraught with biases including gender, race, and other demographic factors [7]. Reviews can also fall for confirmation bias, halo/horns effect, central tendency bias, contrast effect, recency bias, anchoring bias, attribution bias, etc ... Managers may unintentionally be influenced by these factors, which can lead to inaccurate or unfair assessments. This translates to employees believing performance reviews do not accurately evaluate their performance [8].
Finally, performance reviews can be ineffective if there is no follow-up or accountability. If managers do not follow through on their feedback or provide ongoing support for employee development, performance reviews may become a one-time event rather than a meaningful process for growth and improvement.
Performance reviews can be a useful tool for managing employee performance, but they need to be conducted carefully and thoughtfully to be effective. Clear communication, consistent standards, and a focus on long-term growth and development can help ensure that the process is beneficial for both the employees and the organisation.
Personal take on improving performance reviews
There are a lot of smarter people than me thinking about how to improve performance reviews. Many companies have tried alternatives to performance reviews, with varying degrees of success [9]. I also have little personal experience in running such processes, as I have spent all my career so far in IC (individual contributor) roles. That being said, here is my humble proposal to improve performance reviews:
Continuous feedback
The main benefits of performance reviews are, in my opinion, feedback and alignment. As such, it feels counter-productive that performance reviews only happen sporadically rather than having regular check-ins throughout the year.
Not getting clear pointers about my performance on a regular basis is a source of anxiety come performance review season, as I don't know what to expect. That also robs me of the opportunity to address any potential issues regarding my performance in a timely manner. Similarly, I found it difficult to project my career growth when those conversations only happen a couple of times per year. Continuous feedback through 1-on-1s with managers should in theory close that gap, but in practice I have found that there is little time or appetite to talk about performance in those meetings. Instead, those meetings end up being status updates on current projects.
Talking about performance on the spot during a 15-minute biweekly meeting just isn't ideal. Instead, it would be beneficial to see installed a monthly performance check-in where both employees and managers prepare to having a performance discussion over a 30-minute to 1-hour meeting. Those meetings would in practice be mini-performance reviews, complementing and enhancing the benefits of traditional performance reviews.
Employee-driven
In my experience, performances reviews have felt like a bureaucratic process that happens to me every 6 months rather than something I have an active role in. This leads to a cynical view that self and peer reviews are mostly an exercise in confirmation bias, with the narrative already being dictated by managers.
An employee-driven performance review would entail some variations from traditional performance reviews. As the employee plays a more central role, more weight is put on self assessment, evidence gathering, and goal reflection. This is done hand in hand with their manager during their regular performance check-ins, so that when the performance review cycle comes around, the employee has a clear picture of where they stand regarding their performance. The performance review cycle itself consists of peer reviews and a performance discussion with their manager where that feedback is incorporated into their performance file. Finally, employees have the option to present their case to a committee responsible for the final outcome (rewards, promotions, improvement plans, terminations, ...) or to delegate to their manager. Based on the committee's feedback, the employee and their manager set performance goals for the next cycle, and keep repeating the same process.
This approach can lead to a stronger engagement from employees, as they are fully in the driving sit, not only of their performance, but also on the evaluation of their performance. It should also lead to stronger alignment as managers and employees have regular performance check-ins in preparation for the performance review itself. Support can be more readily provided for employees that might be struggling to meet their performance goals. Positive reinforcement can be achieved earlier for employees exceeding their goals. By being more involved in the process, employees might find performance reviews more valuable and supportive of their professional growth.
This is, of course, not a silver bullet, and an employee-driven performance review process is susceptible to its own issues. It requires more resources than traditional performance reviews, both on training employees and managers, but also on pre-review preparation. Most of the biases that apply to traditional performance reviews still apply. This process also puts at an advantage individuals that are more comfortable "selling" themselves, and can negatively impact minorities and cultures that are less individualistic.
Iterative
Ultimately, organisations need to figure out which style of performance reviews work for them. Having performance reviews is significantly better than not having them, but the way they are implemented still has a lot of room for improvement.
From my perspective, performance reviews are an integral part of shaping an organisation's culture, yet it seems to me that there is a lot of cargo-culting in how they are run. Not reinventing the wheel is a good mantra for most companies (unless you're in the business of making wheels), but not all wheels fit all vehicles.
I'm not sure my proposal is the answer, but hopefully it opens a discussion within organisations to iterate on their performance review process, make it align a bit more with their culture and with their employees' expectations, and ultimately make performance reviews more valuable for everyone involved!
According to a survey conducted by the Society for Human Resource Management (SHRM) in 2019, 87% of responding organisations reported using an annual performance appraisal process. Additionally, 7% of organisations used a semi-annual appraisal process, and 5% used quarterly or more frequent appraisals. ↩︎
Some studies that have shown the benefits of performance reviews include:
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Improved performance:
- "Performance Management: Literature Review" by Tricia L. Ryan, University of Manchester, 2016.
- "The Impact of Feedback Frequency on Performance: A Field Experiment" by Sari Kerr, William R. Kerr, and Michael J. Klassen, Harvard Business School, 2017.
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Higher employee engagement:
- "State of the American Workplace" by Gallup, 2017.
- "The Relationship Between Employee Engagement and Employee Performance: A Meta-Analysis" by Christian Vandenberghe, Valérie Michaud, and Simon Tremblay, Journal of Leadership and Organizational Studies, 2019.
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Increased employee satisfaction:
- "2017 Employee Job Satisfaction and Engagement Report" by SHRM, 2017.
- "Annual Employee Performance Management Survey Report" by WorldatWork, 2017.
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Improved goal setting:
- "Effective Performance Management: Maximizing Performance" by the Corporate Executive Board, 2012.
- "From Performance Management to Performance Development" by Bersin by Deloitte, 2015.
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Increased fairness and transparency:
- "The Business Value of Agile Performance Management" by McKinsey & Company, 2016.
- "The Role of Fairness Perceptions in Performance Appraisal: A Two-Study Investigation" by Robert E. Ployhart and Anthony C. Klotz, Journal of Business and Psychology, 2006.
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A study by the Corporate Executive Board found that organizations that set clear performance goals and provide ongoing feedback are more likely to achieve their strategic objectives. The study found that organizations with effective performance management systems were 67% more likely to achieve their strategic objectives than those without. ↩︎
Deloitte Global Human Capital Trends survey: In their 2017 survey, Deloitte found that only 8% of companies surveyed believed that their performance management process drove high levels of value, while 58% said it was not an effective use of time. ↩︎
Gallup's State of the American Workplace report: In their 2020 report, they found that only 14% of employees strongly agree that their performance reviews inspire them to improve. ↩︎
A study by TriNet found that 62% of employees feel "stressed, anxious, or worried" leading up to a performance review. ↩︎
A study by Harvard Business Review Study ("Women Are Rated More Harshly than Men in Performance Reviews") examined performance reviews from a tech company and found that women received more vague feedback, were given fewer concrete suggestions for improvement, and were more likely to receive critical feedback about their personalities rather than their work. ↩︎
Harvard Business Review survey: In a 2016 survey of 1,000 employees, Harvard Business Review found that only 22% of respondents felt that their performance was accurately evaluated during their most recent performance review. ↩︎
There are several examples of companies that have moved away from traditional performance reviews and adopted alternative approaches to evaluate employee performance and provide feedback. Here are a few examples:
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Adobe: In 2012, Adobe eliminated its annual performance review process and replaced it with more frequent check-ins between managers and employees. The new approach, called the "Check-In," is designed to provide ongoing feedback and support for employee development.
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Deloitte: In 2015, Deloitte redesigned its performance review process to focus on ongoing feedback and coaching. The new approach, called "Performance Snapshot," includes more frequent check-ins and eliminates the traditional annual review process.
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Microsoft: In 2013, Microsoft announced that it was eliminating its traditional "stack-ranking" performance review process, which required managers to rank employees on a curve. The company now uses a more frequent and informal approach to performance feedback.
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GE: In 2016, GE announced that it was eliminating its annual performance review process and replacing it with more frequent "touchpoints" between managers and employees. The new approach is designed to provide ongoing feedback and coaching.
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Accenture: In 2016, Accenture announced that it was eliminating its annual performance review process and replacing it with a more frequent feedback and coaching approach called "Performance Achievement." The new approach includes more frequent check-ins and a focus on ongoing development.
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