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.
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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.
1. H. Kromrei, “Enhancing the Annual Performance Appraisal Process: Reducing Biases and Engaging Employees Through Self-Assessment,” Performance Improvement Quarterly 28, no. 2 (July 2015): 53-64.
2. B. Hoffman, C.E. Lance, B. Bynum, et al., “Rater Source Effects Are Alive and Well After All,” Personnel Psychology 63, issue 1 (spring 2010): 119-151; and S.E. Scullen, M.K. Mount, and M. Goff, “Understanding the Latent Structure of Job Performance Ratings,” Journal of Applied Psychology 85, no. 6 (December 2000): 956-970.
3. D.M. Alexander, “How Do 360 Degree Performance Reviews Affect Employee Attitudes, Effectiveness, and Performance?” PDF file (Kingston, Rhode Island: University of Rhode Island, Schmidt Labor Research Center, Seminar Research Series, paper 8, 2006), https://digitalcommons.uri.edu.