HR Management & Compliance

Should the Performance Review Go the Way of the Dodo?

Do performance reviews help employers? What about employees? Do they boost performance, or is there something else going on? Today we’ll explore this issue with Lisa Bodell of futurethink.

By Lisa Bodell, futurethink

Earlier this summer, IBM announced that it would exchange annual performance reviews for a different approach: Instead of being held to a set of goals drafted every January, employees will check in with managers throughout the year and get more frequent feedback, shifting priorities and goals if needed. The new process was crowdsourced through the company’s internal social media platform by 380,000 IBM employees in 170 countries.

What compelled IBM to overhaul this area of its business? While performance evaluations once served their purpose rather well, HR departments have become more data-oriented, and their systems for evaluating an employee’s contribution have become layered and complex. Today’s employees are reviewed and ranked according to an algorithm that may comprise anything from “met revenue or budget goals” and “achieved client success” to “demonstrates kindness” and “collaborates well with others.”

For managers, all these criteria represent multiple data points to plot, more questions to ask and answer, and a volume of forms to complete and submit to HR. Meanwhile, the average employee is bewildered about how to use his or her boss’s evaluation to improve  job performance. How exactly does he or she improve the rating that emerged from an appointed algorithm? Be more of a team player or assert himself or herself more in meetings? Follow directions better or take more initiative? Many directives cut across one another, leaving the average employee frustrated and demoralized.

Indeed, an analysis of 607 separate studies on the impact of performance reviews found that at least 3 in 10 actually diminish employee performance. Beyond the potential harm to employee morale, they’re a huge drain on time and resources. Management research firm CEB found that the average manager spends about 210 hours a year on performance review activities like training sessions and managing and completing forms.

The level of complexity around performance reviews has increased because our instinct is to add layers to an established process instead of blowing up what exists and replacing it with something simpler. We don’t deliberately choose complexity; we just ask ourselves what’s the easiest, most expedient way to accomplish the task at hand? And that’s exactly what sets us up for complexity. We fail to take a moment and identify what really matters: improving, developing, and retaining employees.

Tomorrow we’ll look at what other organizations have done with their performance evaluations.