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 death 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 extremely 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.
1. Tying them to money
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.
Even if the review process is more dynamic and comprehensive than that, 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 review and ensure it is a powerful tool for evaluating your employee's performance and how you can help them develop their skills.
2. Focus on paperwork not conversations
One of the main reasons why many employees and managers have such a bleak view of performance reviews is the burden of all the paperwork.
A 2017 study 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.
3. Not giving feedback outside the review
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.
The employee can end up feeling unfairly blindsided, especially if the feedback is negative, which can leave them feeling alienated and unmotivated. Instead of enhancing their performance and loyalty, you will have damaged it.
Research in NZ 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 shifts 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 Seek found that 94% of respondents believed informal feedback was more valuable than formal appraisals.
So don't wait to pass on praise for a job well-done or discuss ways an employee could do better.
4. One size fits all
Many businesses fall into the trap of having a fixed performance review process that is the same for all employees and all roles.
While this might not be a major problem for a small company (who may not have a formal review process anyway), it can lock larger enterprises into a 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.
The annual review cycle may work for some roles, but for many others assessment may be much better on a monthly or quarterly basis.
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.
5. Not listening to your people
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.
If the review process isn't interactive and the employee's viewpoint isn't sought, you will miss a prime opportunity to gain 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.
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.
Working constantly and constructively with your employees will create higher levels of engagement and performance, help develop talent for the future, and improve the company's long-term viability.
6. Making them overly complex
There's a surefire way to make performance reviews a fruitless and unpleasant task: make them long and complex.
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 they are called Key Performance Indicators. If you assess a maximum of 3-5 KPIs that are focussed on over-and-above value activities, you will obtain much more accurate insight into each employee's performance and contribution to the business.
It will also help keep the conversation focussed on the possibilities ahead rather than raking over the minutiae of the past.
7. Reviewing performance in isolation of company strategy
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.
The company's strategy and targets should be set 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.
Also ensure each employee is evaluated on factors they can actually influence. You don't want to penalise a high-performer because others who contributed to overall results failed to deliver. The performer is the one your business needs to keep.