The Shift in Performance Management

Floppy disks, the appendix, erasable pens, and structured annual performance reviews: the ultimate list of useless and archaic tools in 2018. We’re focusing on how structured annual performance reviews earned its spot on this list and how to improve your performance management system this year.

Where did structured annual performance reviews come from?

Employers complain about them, employees feel victimized and resentful after them; traditional performance reviews can do more harm than good. In fact, a meta-analysis of 607 studies on performance appraisals found that 30% of these reviews actually resulted in lower employee performance. To understand why these reviews are no longer useful, we must look at why they were first put in place. In the 1980s, a new trend emerged to objectively rank individual employees so that companies could reward top performers, keep those in the average range, and cut those at the bottom. Makes sense, right?

Why change?

While this system may work well for an initial company clean up, it doesn’t make sense to cut repeatedly. Many companies have started to recognize the benefits of developing employee skill sets rather than hiring better versions of those employees. With a new emphasis on professional development, the old one-size-fits-all performance management reviews and rating system no longer serve a purpose in the workplace and often results in adverse outcomes. Not convinced? Here are a few more reasons to ditch annual performance reviews:

1. We don’t like negative feedback. In recent years, psychology research has found that the brain will actively resist personal criticism, rejecting information that may, in fact, be true. As many performance reviews focus on negative feedback, these will only leave the employee feeling defensive and will most likely not result in change.
2. Traditional performance reviews are rooted in the past. Research shows that only one-third of the variance in this year’s score can be predicted by the previous year’s performance review. Planning out employees’ goals a year in advance is no longer lucrative– it’s more beneficial to create a system that will follow the natural cycle of your company’s work with ongoing feedback and a forward direction.
3. Ratings are arbitrary and biased. A structured review for each employee is not only time-consuming, it’s also rarely helpful as these ratings and judgments are far from objective and frequently inaccurate. This leaves room for something known as the “fundamental attribution error,” which is to assume the lowest performers will always be the worst performers. This thought process tends to overlook the effects of good or poor management or other professional or personal conditions.

What to do instead

Traditional performance reviews are morphing into more holistic conversations about goals, strengths, and growth. Here are a few tips to help promote these kinds of conversations:

• Make the process more continuous. Instead of focusing on the past, ongoing feedback can be more helpful in pointing out what kinds of tactics are working and which aren’t. Try touching base about projects at the midpoint instead of retroactively.
• Frame the feedback around learning. Align the company goals with individual goals of the employee. Together, the employer and employee can work together in a way that excites the latter and inspires her/him to grow. Also, try team coaching periodically. This can keep individuals from feeling victimized allow everyone to examine group dynamics. It can also promote learning without direct attacks on performance.
• Keep the focus on the solution. Instead of just analyzing past problems, think of these reviews as opportunities to teach. Working through problems together to advance towards individual goals is productive, focused on future performance, and ideally leaves the employee feeling invigorated rather than resentful.

Keep in Touch

There’s no definitive or easy solution for giving feedback (hence why we are throwing out the traditional performance review template). These are helpful guidelines for new approaches in performance management. The bottom line of this shift in performance management is to tailor it to the employees. Ask them what style of feedback they’d like and try some new methods to see what works for your company. 

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