There has been a lot of discussion about the efficacy of performance reviews, or lack thereof, and the value to organisations of continuing to invest in this process. Let’s face it, when companies report that they spend huge amounts of time and money executing a strategy that is designed to lift performance, and it doesn’t, then why would they continue with it?
Whilst ceasing to use performance reviews may seem like the logical next step, a closer look at what they are and asking some questions about why they don’t seem to be working might be wise before assuming they’re a waste of resources. Let’s face it, from an investment standpoint your people are a huge investment. Why wouldn’t you do everything in your power to leverage the return?
So what is a performance review?
The workplace performance review, in its basic form is a discussion between a manager and a team member about the team member’s performance and development. Many organisations conduct these formal processes annually, however there is a lot of variation. There are organisations who conduct bi-yearly, quarterly and some even formal monthly reviews. The cumulative results roll up into a final score or rating at an annual review conducted each year.
The benefits of more frequent discussion are that performance can be corrected quicker and easier, and feedback can be given in a more relevant way. The downside is that more frequent often means increased cost.
So what’s the problem with the performance review system?
1. Once a year is not enough
The worst performance review practice is one where the reviews are irregular or occur only once per year, with no appropriate discussion or performance feedback in between. For performance feedback to be effective in changing behaviour and shifting overall performance, it must be consistent and timely. Annual reviews are too far apart to have a positive impact on performance.
In fact a negative performance review has been shown to produce a decline in an employee’s performance during the coming year.
2. Poor Perception
There are a number of issues with the way performance reviews can be perceived.
● It may be linked with the management of poor performance
● It may be seen by both managers and employees as a one-way interaction
● It may be viewed by managers as just another task to be completed
● It may be feared by employees as they often don’t know what to expect, especially if feedback between reviews is irregular or inconsistent
The outcome of an annual review can also have a major impact on salary and bonuses awarded as many organisation link these processes. Poor review means limited opportunity for either a pay increase or an annual bonus.