Change the Way You Review Employee Performance

The practice of giving employees annual ratings or performance evaluations is widely accepted as an essential and valuable tool throughout the business world. Most employee performance reviews are annual processes, where the manager evaluates subordinates on a battery of skills, or grades them on long-forgotten accomplishments from the past year. In some cases, the employees also participate in self-review. In many organisations, annual salary increases are tied to the performance appraisals.

The reality is that the traditional performance appraisals as practiced in the majority of organisations today are fundamentally flawed. Research has shown them not only to be ineffective, unreliable and unsatisfactory for everyone involved but also counterproductive. In an article published in The Psychological Bulletin, psychologists A. Kluger and A. Denisi concluded that at least 30% of performance reviews ended up in decreased employee performance. The consulting firm, People IQ, in a 2005 survey, found that 87% of employees and managers felt performance reviews were neither useful nor effective. In fact, research on forced ranking systems shows they produce only short-term improvement.

These once-a-year, backwards-looking conversations are in direct contrast with our values-based, vision-driven, forward-looking and collaborative work environments and are damaging employee engagement, isolating high performers and costing managers valuable time.

Leading organisations like Accenture, Microsoft, Adobe and Deloitte, to name a few, are replacing the ranking- and ratings-based annual evaluation cycle with rich, ongoing feedback and coaching focusing on how to develop employees in the future given their current performance.

Their approach is that at the end of every project, or once a quarter if employees have long-term assignments, managers or team leaders answer the following four simple questions:

1. Given what I know of this person’s performance, and if it were my money, I would award this person the highest possible compensation increase and bonus [measures overall performance and unique value to the organization on a five-point scale from “strongly agree” to “strongly disagree”].

2. Given what I know of this person’s performance, I would always want him or her on my team [measures ability to work well with others on a five-point scale from “strongly agree” to “strongly disagree”].

3. This person is at risk for low performance [identifies problems that might harm the customer or the team on a yes-or-no basis].

4. This person is ready for promotion today [measures potential on a yes-or-no basis].

The answers to these four questions provide give a clear depiction of the actual performance of the person being evaluated at that moment in time and in effect eliminate inherent subjectivity and personal biases of the person conducting the evaluation.

This methodology focuses on asking team leaders what they would do with each team member rather what they think of that individual.