Benefits and Compensation

Problems with Performance Appraisals

Were you surprised at the title to this article? Performance appraisals are usually discussed with an eye toward all of their various benefits, like improved productivity, keeping employees focused on goals, and aligning employees with the organizational vision. Indeed, there are arguments on both sides of this issue, and clearly both advantages and drawbacks abound.

That said, today we’re going to focus on some of the problems with employee performance appraisals. We’re going to take a look at some of the very reasons you may even consider either eliminating them or at least revamping the process to make it more effective.

Problems with Employee Performance Appraisals

Here are some common problems with employee performance appraisals:

  • They’re just not accurate in a lot of cases and for a lot of reasons. Here are some examples:
    • They’re an easy outlet for favoritism, which results in employees getting ratings that are higher than warranted.
    • Managers often don’t have or don’t make time to complete them in an honest, open way. And without doing so, that means that they will not be as accurate or as helpful as they should be.
    • Even in the best of circumstances, performance appraisals will be subjective, and each manager will bring his or her own biases to the process, hindering the ability to compare results.
    • No one likes to give others negative feedback, which often means problems will get papered over or left out entirely.
    • Systems often don’t get updated to reflect true goals, especially in today’s environment where goals change much faster than annually. That leaves a situation in which an employee is being reviewed on items that are wholly or partially irrelevant.
  • Lack of documentation of problems, as noted above, becomes a problem itself. This means employers are open to wrongful termination claims if an employee has a record of good reviews but is later fired for poor performance seemingly out of nowhere.
  • Employees often dread them. If the performance appraisal is not linked to specific career goals, top talent might not see the point—and thus may view them as a negative experience. This problem means that the mere act of having a performance review process can actually result in higher turnover—especially for top talent.
  • Having an official performance review process can actually hinder timely feedback the rest of the year. This is because managers often view the performance review process as a catch-all time to cover anything that has been going on with the employee—and thus put off having discussions outside of this process.
  • Giving otherwise good employees negative feedback in this format can cause extreme frustration—even to the point of reducing overall employee satisfaction. This is especially true if the feedback is no longer relevant because it was not delivered in a timely manner.
  • It costs a lot—both in terms of time spent and money invested in performance appraisal systems—to implement a performance appraisal process. That money does not always translate to improved productivity if the process is not carried out to its highest potential.

With any performance review program, there are usually ways to improve the process to mitigate these problems, but employers need to be acutely aware that the entire performance review process can be fraught with risks if not conducted appropriately.

The catch with all of this is that there’s no single answer to fix the problems. Many of the issues—especially those centered on employees not getting accurate and timely feedback—do not necessarily go away in the absence of a formal process. Only by getting more training and incentives for managers to give more feedback on a continual basis will those problems be resolved—with or without a performance appraisal system.

What has been your experience with formal performance appraisal processes? What have you seen work well? What aspects do you wish were simpler?

*This article does not constitute legal advice. Always consult legal counsel with specific questions.

About Bridget Miller:

Bridget Miller is a business consultant with a specialized MBA in International Economics and Management, which provides a unique perspective on business challenges. She’s been working in the corporate world for over 15 years, with experience across multiple diverse departments including HR, sales, marketing, IT, commercial development, and training.