Annual Performance Reviews Underperform

The types of formal yearly performance reviews employers impose on their workers are counterproductive and morale-sapping. Pro or con?

Pro: Just an Annoyance

Formal annual performance reviews are a waste of time. Here are the top 3 reasons why.

1: Everyone hates them. Managers cite performance reviews as one of their most disliked tasks, and employees dislike and distrust the process, too. Psychological studies show that if you’re in a bad mood (and many people are during their review meetings), you’re not open to criticism and suggestions and are less able to plan for constructive career development.

2: They overemphasize the quantifiable. Einstein said “Not everything that can be counted counts, and not everything that counts can be counted.” Many of our employees’ most valuable and important contributions to the workplace do not fit into those little check boxes.

3: They become an excuse for not evaluating performance the rest of the year. As in “Yes, I know Johnson in accounting is lagging a little and seems dissatisfied, but his performance review is coming up in four months—we’ll handle it then.” If you don’t give your employees regular, specific, timely, and relevant feedback (good and bad), you should not be a manager at all.

So stop having formal performance-management reviews. They’re not only a waste of time but also often actively harmful to motivation and happiness at work. Instead, ensure that all employees receive constant feedback and appreciation so that they know at any given time what they do well and what to improve.

Con: Done Right, They Work

Performance reviews are a waste of time only if they are merely an annual event instead of a formal year-long performance management process. The companies that excel in this economy will be those that: 1) create clear accountabilities in their performance management system linked to their key business drivers, 2) communicate effectively and involve their associates in managing their own performance, and 3) focus as much time on developing people as they do evaluating them.

Need proof? Just ask the leaders of Lockheed Martin (LMT), Merck (MRK), GE (GE), P&G (PG), Kellogg (K), and many others that have an effective performance management process. Or read Corporate Culture and Performance (Free Press, 1992) by John Cotter and James Heskett, an 11-year research study highlighting initiatives that contribute to high-performance cultures—and just about every one was linked to a component of an effective performance management program. I don’t deny the problems with performance reviews in a lot of companies where the goals seem arbitrary or the manager isn’t effective in coaching or providing feedback or conducting the review. It is too much about evaluation and compensation instead of achievements and development.

Now, in tough economic times, employees need honest feedback and a sense that they add value and are part of the future success of the company. Now is not the time to skip these critical discussions. Every senior executive who witnesses the power of an effective performance management process agrees with the CEO who once told me “I’d never manage any other way. I wouldn’t know how to drive business results without it.”

Opinions and conclusions expressed in the BusinessWeek Debate Room do not necessarily reflect the views of BusinessWeek, BusinessWeek.com, or The McGraw-Hill Companies.

Reader Comments

Howard Risher

As a consultant with more experience that I care to acknowledge, I have followed this debate for years.

When performance management is a brief year-end event, it is certainly true that it causes problems. That would be like a football coach reserving feedback until the season is over.

Organizations need to identify their 'stars' and the few employees who clearly are problems. Those reviews better be formal and documented.

Employees also need feedback if they are going to improve. My experience convinced me long ago that most employees want to be seen as valued contributors and to grow and develop their capabilities. Ignoring those needs is what often triggers problems.

I agree the "appraisal" forms are part of the problem. The forms, however, have virtually nothing to do with performance management. The forms are merely the place to record observations and decisions related to performance.

Managers need tools to track results and facilitate discussions of strengths and weaknesses. Studies of employee engagement show clearly that performance management is a key to solid performance.

Perhaps the most important issue is having top management champion the importance of creating a culture where solid performance is a priority. If this is "another HR requirement", it will never succeed.

Balaji

I have been part of performance management for over a decade. I certainly feel there is need of performance management process but not constrained to annual event.

I am sure employees would certainly be open if feedback is properly reasoned and pointed to work rather then tagging individual.

Regards,
Balaji S

Steve Bangalore

I had just arrived at a new overseas mega project as the director of finance, when after one week in the country and mimimal interaction with the site manager, he sent me an e-mail with my performance review, which had numerous "needs improvements." I called and asked "What is my last name?" He said, "I don't know." I then asked him, "What to I do?" Same answer. I refused to sign the form and refused the evaluation. What a joke.

steve baker

"Need proof? Just ask the leaders of Lockheed Martin (LMT), Merck (MRK), GE (GE), P&G (PG), Kellogg (K), and many others that have an effective performance management process."

You call that proof?! Every exec with an performance review process will swear up and down that it's effective, no matter how idiotic they are.

Ruth Mott

Performance reviews have not only become sop for "measuring" someone's value--misguided as that may be--unfortunately they have also become a legal tool. If an employee wants to bring suit against a company or a company wants to build a paper trail for dismissal, the performance review and a performance improvement program are fodder for either side.

Ruth Mott
Mott Coaching.com

Kevin Sheker

Man Power in Rockford, Illinois is a joke.

Derek Irvine, Globoforce

Ugh. The dreaded performance review rears its ugly head. We've found five key problems with performance reviews:
1) Infrequent and usually a source of anxiety
2) Gives the viewpoint of one person and offers a limited benchmark
3) Benefits of expected "merit increases" lost due to tight budgets
4) Tenuous link between pay and performance anyway
5) Gives no or imprecise picture of team or division performance

What works better? Constant feedback, from managers and peers that can be rolled up in a kind of 360 performance review. Add tracking and measurement and you have the information you need to both analyze personal/division performance and then act appropriately with training, intervention or rewards.

Strategery

They're a waste of time that could be spent doing something productive.

A good manager constantly gives employees feedback and listens to what they have to say. If there is a formal review (for legal purposes and/or setting salaries), there should be no surprises during the review.

Glenn

Performance reviews: The #1 reason I left the big corporate world and the worst I received was "meets standards."

Alan McCarter

Call me one of the folks who would love to see performance evaluations go away. Some argue that reviews can work, but the companies that actually make the process work are few and far between. Those rare successes are the exceptions that prove the rule that reviews are generally unworkable.

In my career, I've endured a number of performance evaluations, most of which served no useful purpose. The review process was a paperwork drill at best, or a "gotcha" game at worst.

I was taught in the military that effective feedback is:

(1) timely
(2) behaviorally specific
(3) given in manageable doses

Based on personal experience, I added a few more items, credible and non-threatening.

Fundamentally, most managers are not properly trained in giving feedback, so they avoid doing so on an ongoing basis. When performance eval time rolls around, their back is against the wall, and the employee gets the laundry list of things the manager wanted to say along the way, but didn't. Surprises abound, and the feedback is usually so generic that the employee is left with no idea what to do differently in the future.

Consequently, the resulting review fails on timeliness, behavioral specificity and manageable doses. On top of that, so many managers are so busy managing budgets and schedules, that they don't manage their people, and are not familiar with their work. Consequently, they don't have a lot of credibility. The paperwork drill fails to produce a useful result.

On top of all that, the gotcha game rears it ugly head far too often. As Ruth Mott pointed out, the review becomes more of a paperwork trail for the legal department than an actual performance management tool.

Consider the following scenarios fraught with a lack of basic fairness.

(1) The author of the review strategically omits projects and accomplishments from the review, engaging in a form of cherry picking, except in reverse
(2) Evaluation criteria change at the last minute, and may not be revealed until the review meeting itself
(3) The employee is told to sign the review and "your signature doesn't indicate that you agree, only that I showed it to you."

The built in biases in the process destroy credibility. If the agenda was simply feedback, a signature and paperwork trail would be wholly unnecessary. So much for being non-threatening when the manager is demanding a signature.

Any that's why I don't like annual reviews.....

Aseem Sharma

Performance reviews, however ugly they may seem, are an integral part of the corporate world. Most organizations have a pyramidal hierarchical structure, and it's your performance reviews that decide how quickly you rise to the top. So now the question is how do we do it best? My take is:

1) Each employee should be communicated his goals at the beginning of his appraisal period. The goals assigned should be in line with the employee's current position in the company hierarchy.

2) The employee should be asked to accept his goals or talk to his manager in case he has concerns. Should there be any goals which can prove beneficial to the company if achieved, but the manager has not mentioned them, the employee should ask the manager to add those goals to his list after mutual agreement.

3) At the end of the appraisal period the employee should be evaluated against the goals he had accepted earlier.

4) The performance review should occur twice a year, as we all know it's a time-consuming process.

Bob

Imagine if business financials were rolled up once a year in a process dominated by personal biases and ill-defined goals. Everyone says, "Our people are our most important asset," but most people-processes are totally ineffective. And a note to Bob Rogers, don't kid yourself, the performance management system at GE is a joke, too.

Jeffrey SDSU

Think your raise is tied to your performance? Not so. The company decides in advance how much is available for salary increases, then makes the "performance reviews" fit the budget. One big advantage of a union job is you don't have to deal with this phony system. Compensation is based on longevity and collective bargaining; performance is treated as a separate issue.

Varun

All commentators would definitely agree to the point that performance reviews are not rejected, but the way they are modeled or implemented in most companies is rejected. Those companies who swear by it have seen it being successful and giving good results. I have seen people staying up the whole night to fill up their performance review forms. Why can't it be done on a more dynamic and regular basis?

Daniel T

In keeping with life's simple rule, the things we don't like are usually good for us. Green leafy vegies, cod liver oil, two litres of water a day and feedback. No-one sees us better in stressful/joyful situations than the people we spend the majority of our time with. It is part of human nature that we would like to improve ourselves, our postions and life styles, and to achieve that we need a measure, gauge, or yard stick so we know that have moved up. The same is needed in business so to improve we need to be measured and points of improvement or development identified for us. The process should be more often than every 12 months in a shorter form with an overview or summary annually.

How many of us can truly say that we know all of our flaws or weaknesses and the way to improve on these? Supportive management can develop its staff by providing an open and honest review system that is designed to provide personal growth for the individual, which should translate into practical growth for the company.

John

Performance review methods and processes contribute directly to our bottom line and we do very well. Mostly because our end products are corporate-centric performance review methods and tools. Not only do we "consult" for $350 an hour but we also sell this tripe at massive profits to corporate clients.

They dig for gold, and we sell them the pick axes for $500 a piece. Therefore, from the article, I must vote for the "Con"!

Join the Debate

 

Participate More!

Please send us your ideas for new Debate Room topics. If you're an academic, association officer, or other industry expert and would like to write a Debate Room essay, send us a query. Questions? See the

BW Mall - Sponsored Links

Buy a link now!