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What Does Research Really Say About Performance Reviews?

Performance reviews letters on an office desk.

Set­ting aside opin­ion and pref­er­ence, what are the cold, hard facts about per­for­mance reviews and how can we incor­po­rate them into our per­for­mance man­age­ment systems?

At Clear Review, what we love about the field of per­for­mance man­age­ment is that it is con­stant­ly evolv­ing. We’re always keep­ing our eye on the lat­est per­for­mance man­age­ment trends and how tra­di­tion­al prac­tices, such as the annu­al per­for­mance appraisal process, are shift­ing to accom­mo­date new research and gen­er­a­tional preferences.

Lots of peo­ple have strong views about per­for­mance man­age­ment. But if you are con­sid­er­ing chang­ing your per­for­mance man­age­ment sys­tem in your organ­i­sa­tion, it’s best to start by look­ing at fac­tu­al research rather than sub­jec­tive opinions.

Below is a sum­ma­ry of some of the sci­ence behind per­for­mance reviews and how to use this research to achieve the max­i­mum val­ue from your per­for­mance management.

Crit­i­cism by a man­ag­er can have a huge­ly neg­a­tive impact on an employee

The impact of neg­a­tive com­ments dur­ing per­for­mance reviews is some­thing we’ve known for many years. In fact, it was cov­ered in a 1957 Har­vard Busi­ness Review arti­cle titled An Uneasy Look at Per­for­mance Appraisals, by the renowned Dou­glas McGregor.

This might cause some con­fu­sion, giv­en that we know employ­ees want more feed­back. They want to know how they are per­form­ing and how they can improve, yet neg­a­tive feed­back does cause dam­age. It can also prompt employ­ees to behave in a defen­sive man­ner, which means they won’t be tak­ing any of the feed­back on board.

In one study, car­ried out by sci­en­tists at Kansas State Uni­ver­si­ty, neg­a­tive feed­back (even feed­back believed to be con­struc­tive crit­i­cism’) can demo­ti­vate employ­ees who would oth­er­wise be enthu­si­as­tic and engaged. Fur­ther to this, a study of over 1,000 mil­len­ni­al employ­ees found that after their annu­al per­for­mance reviews, half the respon­dents were left with a feel­ing that they couldn’t do any­thing right. Fast Com­pa­ny asserts that more than half of mil­len­ni­als have react­ed to a per­for­mance review by look­ing for a new job, com­plain­ing to cowork­ers, curs­ing, or cry­ing’.

The evi­dence doesn’t end there. Accord­ing to a Gallup poll, employ­ees are far less like­ly to be engaged if they agreed with the sen­tence: my super­vi­sor focus­es on my weak­ness­es or neg­a­tive char­ac­ter­is­tics’. The only peo­ple who are more active­ly dis­en­gaged are those who are com­plete­ly ignored.

So, what’s the solu­tion? Are we meant to sim­ply turn a blind eye to poor employ­ee per­for­mance? Of course not — doing so would mean that they would nev­er get a chance to improve. But, feed­back can be giv­en in a way that does not dam­age morale.

First­ly, man­agers should be trained to give the appro­pri­ate bal­ance of pos­i­tive and con­struc­tive feed­back — ide­al­ly a 3:1 ratio. Employ­ees who receive more pos­i­tive than neg­a­tive feed­back are more pro­duc­tive, engaged and loy­al to an organ­i­sa­tion. Sec­ond­ly, train your man­agers to focus on strengths dur­ing per­for­mance con­ver­sa­tions, rather than just areas for improve­ment. Research from Gallup shows that employ­ees who use their strengths sig­nif­i­cant­ly out­per­form those who don’t.

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Reg­u­lar one-to-one meet­ings results in more engaged and pro­duc­tive employees

In a TriNet study, near­ly 85% of mil­len­ni­als believed they would be more con­fi­dent and capa­ble in their work if they were able to have more fre­quent com­mu­ni­ca­tion with their man­agers. This is unsur­pris­ing when you con­sid­er the sig­nif­i­cance of the role of a man­ag­er on engage­ment lev­els and organ­i­sa­tion­al per­for­mance. In fact, employ­ees whose man­agers hold reg­u­lar meet­ings with them are almost 3 times as like­ly to be engaged.

With this in mind, a once or twice a year per­for­mance review is sim­ply not suf­fi­cient when it comes to qual­i­ty coach­ing and employ­ee sup­port. Such com­mu­ni­ca­tion should hap­pen on a day-to-day basis, in real-time, with more detailed check-ins occur­ring month­ly. Once com­pa­nies incor­po­rate con­tin­u­ous per­for­mance man­age­ment dis­cus­sions, they’ll find that con­ver­sa­tions become more hon­est and far more flu­id. Employ­ees will under­stand what is expect­ed of them and what their pri­or­i­ties are in terms of per­for­mance and development.

If you don’t know what to dis­cuss dur­ing these month­ly meet­ings, the Clear Review team have made it easy for you and pre­pared a free one-to-one meet­ing tem­plate to get you started.

Clear, SMART objec­tives improve performance

Unfor­tu­nate­ly, goal-set­ting isn’t made a pri­or­i­ty in all busi­ness­es, which is sur­pris­ing giv­en all the ben­e­fits it offers. Accord­ing to a Gallup poll, half of employ­ees don’t real­ly know what’s expect­ed of them at work. They are sim­ply try­ing to do their best with­out appro­pri­ate guid­ance. Although this might be well-inten­tioned, with­out clear, mea­sur­able goals, employ­ees aren’t like­ly to live up to expectations.

All employ­ees should have clear pri­or­i­ties or tar­gets and agreed dead­lines for com­ple­tion — and research has shown that when employ­ees have active par­tic­i­pa­tion in their objec­tive set­ting, they are far more dri­ven and per­form to a much high­er stan­dard.

Few man­agers and employ­ees are con­tent with their cur­rent per­for­mance review process

It prob­a­bly won’t sur­prise you to hear that most man­agers and employ­ees aren’t over­ly keen on their exist­ing per­for­mance man­age­ment sys­tems. In fact, accord­ing to one study, 87% of par­tic­i­pants found their annu­al reviews to be inef­fec­tive. Anoth­er source gives sim­i­lar results, show­ing that only 14% of organ­i­sa­tions are hap­py with their per­for­mance man­age­ment sys­tems.

Annu­al appraisals fill every­one with dread and pan­ic, usu­al­ly because they are try­ing to achieve too many out­comes from one meet­ing and there is often so much rid­ing on them. When reviews are held more fre­quent­ly, they become more infor­mal, con­struc­tive and hon­est, which means they gen­uine­ly lead to improved per­for­mance — some­thing that annu­al appraisals have nev­er been proven to do.

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Employ­ee per­for­mance rat­ings could be doing more harm than good

Are per­for­mance rat­ings use­ful? Research indi­cates that in all like­li­hood, they are doing your busi­ness more harm than good in the long term. One source shows how they can acti­vate the fight or flight’ response in the brain because they are so tremen­dous­ly stress­ful and intense. But why do we use per­for­mance reviews and where did they originate?

Dur­ing World War I, the US mil­i­tary cre­at­ed a mer­it-rat­ing sys­tem that was designed to flag and dis­miss poor­ly-per­form­ing employ­ees. By the time World War II came around, this had evolved into a forced rank­ing sys­tem, which was meant to iden­ti­fy high-per­form­ing employ­ees with the poten­tial to become offi­cers. By the 1940s, 60% of US com­pa­nies were using a sim­i­lar sys­tem to deter­mine employ­ee per­for­mance and allo­cate rewards and pun­ish­ments, but rat­ings had their crit­ics even back then. In fact, Dou­glas McGre­gor in 1957 said that employ­ees who want­ed to per­form well would do so if sup­port­ed prop­er­ly — with­out the need for a car­rot or a stick.

In most organ­i­sa­tions, rat­ings are deemed nec­es­sary in order to dri­ve per­for­mance relat­ed pay deci­sions. But research has also found that per­for­mance rat­ings are so prone to bias and reverse engi­neer­ing’ that they have lit­tle cor­re­la­tion with actu­al per­for­mance. Whilst many com­pa­nies have decid­ed to ditch rat­ings, many organ­i­sa­tions are con­fused about what to replace them with. This is a com­plex top­ic so we have writ­ten a ded­i­cat­ed eBook on the lat­est approach­es to man­ag­ing per­for­mance relat­ed pay which you can read for free.

If you want to adapt or over­haul your employ­ee review process and you’re look­ing for employ­ee per­for­mance soft­ware to help you on your way, Clear Review can help you. Clear Review soft­ware is sim­ple, intel­li­gent and easy to use. To get you start­ed, you can book a free per­for­mance man­age­ment soft­ware demo right now.