Dump Traditional Reviews to Better Measure Performance

Employees have been complaining about performance reviews almost as long as HR has, yet most organizations are still doing the classic “you’re a 4, but I can only give you a 3” performance reviews. We expect the traditional performance management process to provide good data and inspire our employees to perform better, but no matter how much we try, it doesn’t happen. We need to stop punishing our employees, our managers, and HR practitioners, and move on to a new way of measuring — and accelerating — performance.

Organizations do performance reviews for two reasons: to help employees perform better and to gather data that informs downstream talent decisions such as merit-based compensation, promotability, and succession planning. For the annual review process, managers are instructed to give team members feedback on how they’re doing against previously determined goals. HR often asks managers to rate each employee against an ideal competency model. Together, these two major parts of the traditional review process should yield useful data on an employee’s performance that can inform performance feedback — but these practices rarely accomplish either objective.

Why Traditional Performance Management Practices Fail

Annual goals, feedback, and ratings — the standard elements of the traditional approach — are ineffective.

Annual goals. Most organizations mandate annual goals for each employee. Often, these goals are set by the employee along with their manager; in some cases, “cascaded” goals replicate the organization’s goals at the individual level. Then, in theory, managers can monitor and assess their team members’ progress against those goals to ensure everyone is working on the right things. But goals — especially cascaded goals — are infrequent, nonrepresentative proxies for outcomes.

Unless an objective, measurable target exists, as in sales roles, few people’s days consist of work that can be fully captured in a conventional list of goals. Many employees flex and flow at a rapid pace, moving dynamically between daily tasks, longer-term priorities, and fire drills — all three of which roll up to larger organizational objectives (or “what keeps the lights on”). By looking exclusively at goal completion, you’re missing where most people actually spend their time.

Virtually all employees know what they should be working on without explicitly stated goals, which makes the required documentation of goals in an infrequently used system a fill-in-the-blank exercise adding no value. These goals may well be a helpful tool for some employees in some parts of the organization, but their usefulness as an organizationwide measure of performance for all employees just isn’t proven in the real world.

Infrequent feedback and ratings. Because the traditional performance management process is time-consuming for everyone — employees, managers, and HR — companies generally require it only once per year. But human memory is fallible; an “annual” rating is most representative of the most recent weeks of an employee’s performance, not the entirety of the previous year.1 Humans are also pretty bad at objectively rating qualitative “uncountables,” such as competencies and values. In fact, research suggests that when assessing these qualities, the rating is more about the person doing the rating than the one being rated.2

Telling employees what they’re not good at typically results in defensiveness, lack of self-confidence, and fear.3 And being the person giving the feedback doesn’t feel great either, no matter how much mayonnaise you slather on that feedback sandwich. While the “you need to get better at” dialogue is sometimes necessary, the data is clear: Frequent strengths-based conversations are the most effective and efficient way to accelerate performance. Yearly conversations are too infrequent to drive change.

The sunk time and emotional angst of the annual rating often leaves the employee disappointed and defeated, but grown-ups don’t actually need ratings or grades to know where they stand. They do, however, need reassurance that their job is safe, which comes via frequent conversations with their manager. While the dreaded rating approach is unneeded, the same conversations that create psychological safety also accelerate productivity and performance. When managers pay attention to their employees at a radically frequent tempo (at least once a week) and focus more on their team members’ strengths and wins than on what they’re doing wrong, employees do more and better work.

From Performance Management to Performance Measurement

It can be hard to deviate from tradition, and some executives and practitioners are afraid to walk away from the significant investments made in technology and training and the sunk cost of time spent designing and executing the traditional performance management process. Some are emotionally invested in championing the traditional process (and may have spent their careers trying to get the darn thing to make some positive difference). But if the traditional approach isn’t serving our employees, our managers, or our organizations, why are we still doing it?

The first step to a better system is to remove the common practices that cause so much strife: no mandated goals, complicated rating approaches, or strictly annual performance conversations. We also need to stop collecting and using unreliable, stale data to inform downstream talent decisions. Dumping these ineffective practices immediately reduces the friction of the current process.

Forget the myth of “what’s measured gets done.” In reality, what’s measured gets our attention and affords us awareness of our progress. HR and the rest of the organization still need quantitative data, to be clear, but ratings derived from poorly designed approaches aren’t useful. One of the biggest challenges in measuring knowledge workers’ performance is counting the uncountable in an ever-shifting, dynamic environment. However, we can capture a meaningful chunk of those uncountables by starting with the end in mind — what, specifically, are you trying to find out? Are you trying to assess if an employee is delivering high-quality work at the expected level of productivity? To identify any critical flags such as flight risk or right-now readiness? To gauge an employee’s level of “teaminess” — those social skills like collaboration, communication, and adaptability?

Quantitative data collected frequently on these critical few performance indicators allows HR to aggregate data points and create a single value that can be used to inform, for example, variable compensation decisions. By focusing on the few essential things you need to know and gathering data more narrowly (for example, individual-level feedback only from those who know the employee best), you can ease the overall process. So, to use the data as an effective talent guidance system, determine exactly which data points and questions will garner the most useful information. Simplified, more frequent data collection will offer current views into your talent landscape.

Performance data can also help identify your hot spots and hotshots so that you can better support and optimize talent at the individual level. Non-aggregated performance data can guide downstream talent decisions such as giving certain employees extra support, flagging stellar performers who might be ready for more responsibility, and even pinpointing mismatches between employee skill sets and their jobs.

For example, one organization discovered in its performance data that a particular employee consistently delivered high-quality work and had a uniquely valuable skill set that made her a potential flight risk, but her rated teaminess always seemed low. One might assume that this was a problem but, given her role, this employee didn’t actually need to be “teamy” all the time to add extraordinary value to the company. Instead, the organization simply needed to minimize her team-oriented responsibilities such as brainstorming and group work.

It may be hard to imagine abandoning decades of tradition and big investments in old-fashioned performance reviews, but the world of work has changed. How we measure employee performance needs to keep up with the lightning-fast speed of change. This requires pinpointing the critical few aspects of an employee’s performance — for example, productivity, quality of work, and teaminess — and measuring what matters most. Simplicity allows for more frequent measurement, which in turn offers a more representative and up-to-date view of employee performance. It’s time for our practices around performance measurement to transform. Human resource practitioners and leaders deserve to serve their employees in a new and better way, and employees deserve it, too.