10 Key Tips for Effective Employee Performance Review by Susan M Heathfield March 2018

Few people look frontward to their annual employee review, but I don't think that's a big secret.

In fact, many employees dread their upcoming evaluations for weeks or months in advance. And whether or not they're willing to admit it, most managers hate employee evaluations, too.

Withal we go on to suffer through almanac evaluations, submitting ourselves to the status quo of these unappealing, supposedly necessary checkups on organizational health. According to a contempo SHRM study , equally many every bit 72% of companies still conduct an annual employee appraisal.

Although employee evaluations tin be uncomfortable, they're not like root canals; subjects don't oftentimes experience tangible benefits at the terminate of the process.In some cases, they're worse off than they were earlier.

Eye managers, squad leads, and employees of all types accept voiced their anticipation towards such annual evaluations.A People IQ survey establish that 87% of both managers and employees believed annual reviews were ineffective and not useful.

"The reality is that the traditional performance appraisement as proficient in the majority of organizations today is fundamentally flawed and incongruent with our values-based, vision-driven and collaborative work environments," writes executive charabanc Ray Williams.

And so why exercise nosotros deport annual evaluations at all? What is information technology about this procedure that so many organizations detect attractive how has it persisted for so long? In many cases, information technology's the mindset of "this is how we've always washed it" or "if it isn't broken, don't fix it" that has perpetuated the employ of annual employee evaluations.

It'southward an unfortunate predicament, because most employee evaluations are broken.

It's fourth dimension to fix them.

The encouraging news is that senior leaders and organizations around the globe are ditching their annual employee evaluations in favor of more effective and productive strategies.

Unfortunately, some companies commit to updating their outdated employee review processes simply keep administering them by a dissimilar name.

Here are nine research-backed reasons why everyone should take time to rethink their annual employee evaluations. That thoughtfulness might effect in plans for a total overhaul, or some meaningful upgrades; either way, it's an important practice:

1. They're an overly simplistic measurement for a complicated subject.

One of the greatest failings of the employee evaluation is that it attempts to quantify the value of an employee'southward contributions, often within a modest numerical range.

In her report "Behold the Entrenched—and Reviled—Annual Review," which  aired onMorning Edition,Yuki Noguchi explains:

Companies started embracing the review arrangement in the 1960s and 70s, hoping to manage bigger workforces more effectively. They needed a compatible grading system.

The uniform grading system is extraordinarily problematic because it introduced the five point scale, probably the world's worst candidate for measuring human potential.

On a v point scale, in that location'due south no room for context.

A single digit tin account for a huge deviation in the perceived meaning of someone's score, and that'south simply a minor role of the problem. A whole host of complications arise when yous attempt to shoehorn human beings into a standardized mold.

For a literal estimation, there's an first-class episode of 99% Invisible that details the history of fit standards, the one-size-fits all fallacy, and how breaking from those standards not just improved results just, in some cases, saved lives.

Todd Rose, the Harvard Graduate Schoolhouse of Education's Director of the Heed, Encephalon, & Pedagogy Plan, shared some fascinating insights on this topic on the TEDx phase:

ii. Scientific discipline tells us that even great employees are crushed by receiving negative feedback.

It's a common belief that the feedback employees receive during their annual evaluations is constructive—that information technology's providing them with learning opportunities and some invaluable insights into opportunities for growth. Employees with a desire for self-improvement and a willingness to acquire tin accept the feedback they receive in reviews and become better at their job.

Unfortunately, that conventionalities isn't ever truthful. In many cases, employees receive negative feedback and experience fallout as a result.

In her summary of some fascinating research carried out by scientists at Kansas State University, Eastern Kentucky University, and Texas A&M University, the Washington Post'southward Jenna McGregor explains how, in the context of a performance review, 'constructive criticism' doesn't really build anyone up. Instead, it deflates even those employees who might be perceived as ready to receive it:

"Those who similar to larn—presumably some of the all-time employees—were significantly bothered by the negative feedback they received."

It's not nearly having thick or thin skin. Fifty-fifty the elements of a performance review that a manager doesn't intend to be critical can ofttimes be perceived in a negative light.McGregor goes on to say that "managers need to be peculiarly careful that what'southward intended every bit praise doesn't get misconstrued as criticism. This especially applies to performance ratings, which HR professionals often plot along a bell curve and use to allocate employees' performance."

A TriNet study of over 1,000 young professionals exiting their annual performance reviewsestablish thathalf of the respondents felt they couldn't practice anything right.

In his recent Forbes article, "Time to Scrap Performance Appraisals?", Josh Bersin notes:

People are inspired and motivated by positive, constructive feedback—and the 'appraisal' process near always works against this.

Operation appraisals aren't only wasted effort; they can fifty-fifty produce resultscounter to organizational goals.

Many employees aren't leaving their reviews with brilliant insights into their professional development paths; instead, they're walking away with a sense of disappointment and lowered self-esteem that ofttimes translates to decreased performance.

Learn more than near the connection between feedback and engagement in our gratuitous Essential Guide to Employee Appointment.

3. They're traditionally one-sided.

Almanac performance reviews don't just rob employees of the opportunity to share their unique stories; they rob managers of the opportunity to learn about the work environs they're cultivating and place novel ways to move their organizations forward.

That'southward a huge bullheaded spot.

Managers significantly impact the outcome of their employees' work and their growth in an organization. That impact tin exist positive or negative.Nobody wants to be a bad boss, but good intentions aren't enough. In that location are a lot of well-intentioned only misguided bosses out at that place.

A constant multidirectional flow of communication isn't just useful in helping employees accomplish their highest aspirations; it can help managers and leaders reach a higher level of competency equally well.

Research by Utah Valley University showed that less than a 3rd of organizations provide fantabulous leadership and advice skills training for managers.

When you consider the impact that managers and leaders can accept across an system, information technology's clear that we should provide them with every opportunity to improve their competencies, whether they're hard or soft skills.

Better communication can help leaders and managers expand their own competencies and help their teams to do the aforementioned.

four. No matter how difficult yous try, they'll always be subjective.

In his lightning-rod feature for the Wall Street Journal, leadership expert Samuel A. Culbert details one of the annual employee evaluation'due south greatest flaws. Behind the 1 to 5 scale'due south facade of objective measurement, at that place will ever be an inescapable layer of subjectivity:

"In virtually every instance what'south beingness 'measured' has less to do with what an individual was focusing on in attempting to perform competently and more to do with a checklist practiced'due south assumptions about what competent people do."

The Idiosyncratic Rater Event, published by The Marcus Buckingham Company, reveals that "61% of a functioning rating is a reflection of the rater, non the ratee."

We try to exist equally objective as possible by using matrices or a series of simple scores but the truth still remains: managers and their direct reports are all human being.

Dissimilar raters will consistently give unlike ratings to the aforementioned person, whichcan be extraordinarily problematic when the results of these evaluations are tied to employee compensation and career advancement.

5. Some evaluation frameworks derail teamwork and pit employees against one some other.

In a case adult for a class on scaling organizational modify, the Stanford Graduate School of Business organization detailed the history of Adobe'south employee evaluation practices and its successful restructuring.

There were several key findings in the instance, one of which was the counter-constructive nature of stack ranking:

With stack ranking, Adobe employees felt compelled to strategically ensure they ranked among the top fifteen%... Employees attempted to maximize individual success, oft at the expense of the squad... stack ranking threatened effective teamwork and collaboration because information technology pitted employees against one some other.

Because only a sure pct of employees tin be listed as top performers, many employee evaluation practices with a stacked ranking system risk harming the health of the organizational temper.

6. There are better alternatives.

If it's so problematic, what practise we replace the annual employee evaluation with?

You lot don't have to immediately resort to a dramatic shift, and sometimes that selection isn't even on the table. That's okay, though.

Many of the virtually negative aspects of the annual employee performance review tin be mitigated, but by exhibiting a more frequent cadence of check-ins throughout the year.

As part of a panel word during the panel discussion at our recent "The Future of Work: Talent and Culture for the 21st Century," outcome, Jonathan Basker explained that the almanac review isn't the trouble all past itself.

It's when that review becomes the singular direction moment between an employee and the person who is supposed to exist dedicated to helping them achieve their best:

If yous manage people, make sure you've internalized the obligation you have to these other human beings, how much y'all affect someone else'southward life, and the responsibleness that comes with that, whether you similar information technology or not. If you have a problem with that, stop being a manager. You owe those people the growth they're looking for—the environment and life they're looking for.

The 360 review

An employee review can go much more effective and useful when it's no longer i-sided. The 360 review is becoming more than and more mutual across modern businesses, especially as the competition heats upward for top talent and organizational performance.  If y'all're looking for an piece of cake way to implement and track them, our friends at Small Improvements have a nifty tool for 360 reviews.

Peer recognition

Although it isn't exactly a formal review process, peer recognition is a smashing way for employees to understand which of their contributions impact the organization near positively while showing appreciation. Because it'due south oft given on a regular cadence, peer recognition can likewise assistance avert the 'blindsiding' effect some employee evaluations can take. If you're using a organization like Bonusly to track and catalog these interactions, it tin can be an extraordinarily useful tape to look back on during more comprehensive long-term reviews.

Read about the power of recognition in our popular Guide to Modern Employee Recognition.

Regular meetings

We recently published an article on the positive impact 1-on-one meetings have had on our management relationships. Bank check information technology out for some great tips on improving the effectiveness of these meetings. Nosotros've also got one on holding more productive and enjoyable group meetings.

Plus, consider implementing employee engagement surveys equally a frequent, timely way to gather feedback from your employees.

vii. They're subject field to many biases.

Whether they take a more subtle grade or they're baked directly into the review's framework, unconscious biases are oftentimes present annual employee performance reviews.

Although most managers work hard to eliminate visible biases from their review process, they inevitably notice their way in. In many cases, such biases are difficult to phone call out because they're not practical consciously.

Here are a few examples of avoidable biases that may exist hiding in your ain review process or in your subconscious:

Forced/stack ranking

Stack ranking forces managers to hand out scores that aren't reflective of an employee's true performance by permitting only a sure percentage of employees to receive high scores. Instead of accurately measuring an employee's performance against the visitor standard—that is, the standard they agreed to uphold when they signed on—stacked ranking pushes managers to measure out employee functioning confronting that of their peers in a vacuum.

Why is that such a problem? Let's have a look at this example:

Audrey direct manages a team of six. Each of her direct reports has performed admirably, either achieving or surpassing the goals they gear up together at the commencement of the review period.

Logically, each of Audrey's reports should receive a strong score in their performance review; nonetheless, in a forced ranking structure, only a small subset of those employees can receive the highest score. What's worse, the greater bulk of Audrey's reports would receive scores lower than they should accept rightly earned.

Although stack ranking every bit a format is on its way out, many organizations all the same use it in employee reviews. Proponents of stack ranking argue that it leads to a higher level of organizational performance overall, but contemporary research suggests the reverse.

Key trend bias

On the converse side of the forced/stack ranking issue lies the fundamental tendency bias.

This bias is well-nigh likely to announced in situations where managers tasked with scoring individual employees poorly opt instead to give everyone a similar, satisfactory score. As Impraise cofounder Steffen Maier explains in his Forbes article, it's peculiarly common for managers to participate in this form of bias when faced with the responsibility of giving feedback to low performers.

Why is key tendency bias a big problem?

Feedback is crucial to employee development and sometimes that feedback is necessarily focused on areas employees tin can improve. If central trend bias takes hold of your employee review process, you lot're more probable to blindside your poor performers when you lot eventually have to let them go since they'll exist able to point on a history of strong performance ratings.

Combatting fundamental tendency bias is straightforward once you've established that it does exist. Instead of waiting until the end of the year or quarter to take those discussions, provide a channel for continuous feedback between employees, their peers, and their managers.

This strategy allows employees an opportunity to class-right early and remedy the situation, which non only benefits them as individuals merely benefits the organization as a whole by helping to ensure employee output matches or exceeds expectations more ofttimes.

Similarity bias

Similarity bias happens when someone sees more shared qualities in one person than they do another, and every bit a result, shows a greater affinity towards them. This phenomenon presents itself frequently in daily life outside of piece of work, and takes on a peculiarly worrisome grade in the workplace.

Why is similarity bias such a problem?

Similarity bias shows its more insidious side when applied to the workplace, and especially in the context of an annual functioning review, which may impact an employee'southward immediate compensation movie, as well as their future at the organisation.

"You're more like me, so I like you more; therefore you lot become improve marks in functioning evaluations; therefore you get larger or more frequent raises, greater admission to hands-on training, and more than career advancement opportunities."

Similarity bias tin be incredibly difficult to overcome on an organizational level, especially in the context of employee reviews because doing and then relies on individual managers to recognize and compensate for an inherent tendency to similar those similar them. And research has shown that human beings are really bad at doing that.

While some examples of similarity bias may be more obvious or easy to spot, other more subtle examples are likely finding their way into reviews, undermining their effectiveness and purpose. Look for prove of similarity bias in employee reviews—the kickoff stride toward mitigating any bias is to admit its beingness.

Recency bias

Are managers taking in the full flick of an employee's contributions over the yr, or are they focused on the few most recent ones?

Recency bias is a common feature of annual performance reviews, peculiarly inside structures without some kind of continuous feedback mechanism. Managers are faced with the challenge of looking back on the contributions of all their direct reports over the past year and accurately assessing them. To put the difficulty of doing this finer into context, permit's start with something simple and personal: try to remember what you had for tiffin on this day, six weeks ago.

Every bit Sharlyn Lauby explains in a contempo HR Bartender post,

This can become both means. A poor performer does something terrific and their past performance is forgotten. Or an splendid performer makes a mistake and it weighs down the rest of the review.

Spillover bias

Spillover bias is the opposite of recency bias. Spillover bias moves managers to charge per unit employees based on their historical performance level. Similarly to recency bias, spillover bias can touch on a manager'south review process (and an employee's career) either positively or negatively, based on the nature of the manager'due south recollection.

Halo/Horn bias

Halo and horn bias are similar to both recency and spillover bias in that managers aren't considering the full pic of an employee'southward contributions throughout the review flow. Halo and horn biases focus a manager on i specific past activeness. If that action stands out to the reviewer as good, it produces a 'halo' effect; if information technology stands out equally bad, information technology produces a 'horn' effect, and becomes the standard by which that employee is rated from that point on.

Mitigating temporal bias

The simplest step toward mitigating temporal biases like recency, spillover and halo/horn bias is having a continuous feedback machinery that both managers and employees can await back on every bit a reasonably accurate and objective lens for gauging the year's performance.

8. They're expensive

The resources requirements for annual employee evaluations, both in terms of bandwidth and lost productivity might exist a surprise if you added them upwards.

An effectively-conducted review requires a lot of try and consideration, which comes at a significant cost. The foundation of that cost is uncomplicated to calculate—simply start with these primal components:

• The managing director'southward hourly wage = (ten)

• The manager's fourth dimension spent completing the written portion (i hour on average)

• The manager's time spent analogous the review (permit'southward call information technology 30 minutes)

• The manager's time spent in the formal review meeting (1 hour on average)

• The average hourly wage of direct reports = (y)

• The direct report'due south fourth dimension spent in the formal review meeting (1 hour on boilerplate)

• The number of reports a manager is expected to review = (z)

What yous finish upwardly with is an equation that looks something similar this:

(2.5x + 1y) * z

For a single manager making $55/hr with x direct reports making an average of $35/hr, the toll just in hourly wages for one almanac review bike could exist as high as$1725. Now repeat that process for all managers required to perform annual reviews.

Now utilize the same formula to any of these managers who likewise participate on the receiving finish of an annual review with senior leadership or their own firsthand director.A few of these variables may look a scrap different in your organisation, but this is some bones math you tin utilize to evaluate the cost in hourly wages, and it'due south math that doesn't e'er get washed.

Not a fan of doing math? No problem! I createda spreadsheet yous can use. Simply make yourself a copy and punch in the numbers.

Keep in mind also that this is representative only of the cost in hourly wages, with no consideration for the cerebral load associated with job switching or the negative impact reviews tin can potentially have on employee morale.

With that in heed, it's not surprising that many annual reviews take the form of a x minute, impromptu surface-level meeting that neither political party gains from.

So this begs the question: is either arroyo worth information technology?

nine. They occur too infrequently to exist actionable.

In the best case scenario, both parties might leave a particularly positive or constructive evaluation feeling re-energized about and re-focused on their work. Just what are the odds they'll exist equally engaged and excited one month, ii months, or six months after the evaluation?

Because they occur only once a year, fifty-fifty the all-time almanac employee evaluations aren't oftentimes enough to sustain motivation and employee appointment. A lot tin can happen in a year, which is why frequent, timely, and ongoing feedback and recognition are invaluable to continuous employee evolution.

Josh Bersin estimates that nigh seventy% of multinational companies are moving away from annual reviews that are critical of past behavior "at the expense of improving electric current performance and grooming talent for the future" and moving towards the model of regular conversations nigh performance and development, reports the Harvard Concern Review.

"Rapid feedback matters because it translates experience into learning while the experience is still alive for us. This translates into registering whatever value in that location might be in the feedback more securely, and into internalizing the learning more than fully," writes Niko Canner in his piece for Thrive Global.

See something, say something

If you're addressing an result with someone for the outset fourth dimension during their performance review, they'll no dubiousness be wondering why you didn't say something sooner. "Effective managers discuss both positive performance and areas for improvement regularly, even daily or weekly," writes Susan M. Heathfield for The Balance. "Aim to brand the contents of the performance review word a re-emphasis of critical points."

Frequently giving constructive developmental feedback, whether you're rewarding past successes or focusing on opportunities for improvement, will increase the number of positive interactions you accept with your team. By increasing the frequency and lowering the perceived stakes of each teachable moment, you might fifty-fifty first to enjoy giving feedback.

In decision

Although the annual employee evaluation is fairly entrenched beyond many organizations, information technology has proven non to be as useful a tool as it was promised to be decades ago.

Fortunately, in that location are many great alternatives to the annual review, and some excellent strategies for improvement when it can't be replaced.

Let'south take a moment to recap with this infographic:

Ready to take the next pace in building an boggling company culture? Bank check out our latest guide:

Originally published on March 07, 2018 → Terminal updated September xiv, 2021

George is dedicated to strengthening organizational cultures with thoughtful leadership and frequent recognition. George formerly managed content and community at Bonusly.

Bonusly is a fun, personal employee recognition and rewards platform that helps people feel engaged and successful at piece of work. ✨ Learn more about u.s.a..

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