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.”