Questioning Performance Reviews

"I see nothing constructive about an annual pay and performance review. It’s a mainstream practice that has baffled me for years."

So wrote Samuel Culbert, a professor at UCLA's Anderson School of Management, in a provocative essay called "Get Rid of the Performance Review!" that appeared in 2008 in Business Insight (now renamed Executive Adviser),  a section ofThe Wall Street Journal that is produced in collaboration with MIT Sloan Management Review.

Now, Culbert, with Wall Street Journal senior editor Lawrence Rout, has expanded on that theme in a new book, also called Get Rid of the Performance Review!, Culbert was quoted this week in a New York Times blog on his views:

“There is a very bad set of values that are embedded in the air because of performance reviews."

But what's the alternative to performance reviews? According to Culbert's new book, companies would be better off if managers and employees focused on how, together, they will better achieve goals the organization has established-- something that he calls a "performance preview" and that can take place any time. 

Such an arrangement, according to Culbert, fosters teamwork. With performance previews, he writes in the new book, "subordinates and bosses focus on the real goal -- corporate results -- and how they can work together to get where the company wants them to go."

2 Comments On: Questioning Performance Reviews

  • czander | May 20, 2010

    Edward Deming writing, about 14 points needed to transform management and the corporation, believed performance appraisal or pay for performance were counterproductive and simply bad management. In his point #3 called – Evaluation of Performance, Merit Rating, or Annual Review- and he proposed their eradication. Deming writes, “The performance appraisal nourishes short-term performance, annihilates long-term planning, builds fear, demolishes teamwork, nourishes rivalry and politics… it leaves people bitter, crushed, bruised, battered, desolate, despondent, dejected, feeling inferior, some even depressed, unfit for work for weeks after receipt of rating, unable to comprehend why they are inferior. It is unfair, as it ascribes to the people in a group differences that may be caused totally by the system that they work in.” In other words, commitment is destroyed.
    It is commonly understood that performance reviews, pay for performance, and incentive systems have little to do with the motivation, but they are successful in punishing employees and rupturing relationships. Many studies point out that rewards actually undermine the very process they are intended to enhance. In agreement, Deming believed that extrinsic motivators were a fallacy. When asked the question, “Is money a motivator?” he replied, “It is not!” He believed the same applies to all forms of extrinsic motivators, they do not motivate. When it comes to intrinsic motivation the relationship between reward and motivation is more complex. For example, offering rewards for easy tasks or just completing a task may lower intrinsic motivation. It is a mistake to assume that employees are motivated in predictable ways by differential rewards and punishments.

  • Andrew McFarland | June 28, 2010

    The notion that annual performance reviews do anything to improve performance is a fallacy.

    A better system I’ve seen is one where employee’s pay is “marked to market” semi-annually. This method assumes a great deal of transparency in market rates. Managers have conversations with employees about goals while employees know they are being treated “fairly”.

    All other things equal, employees aren’t as concerned with being paid “a lot” as much as they are about being compensated appropriately for their contributions.

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