Quick Summary
Performance reviews can offer powerful levers for boosting employee performance. However, far too many businesses rely on outdated or poorly executed performance management processes that leave workers resentful and frustrated.
Fortunately, implementing a series of 8 simple best practices (including clearly defining what success looks like, giving specific feedback, reframing reviews more thoughtfully, and getting external help) can transform reviews into reliable engines for high-performing strategic performance management.
Most Performance Reviews Underperform.
In other words, rather than facilitating improvement among employees, most performance reviews and other performance management processes fall flat or even produce counterproductive outcomes. In fact, more than half (54%) of organizations don’t believe their performance management activities have improved actual performance, according to advisory group McKinsey.
Other research bears this out. A survey of nearly a 1,000 global companies from WTW (formerly Willis Towers Watson) found that only just over a quarter (26%) of companies view their performance management systems as effective.
Employees take an even dimmer view of performance reviews. Only one in five employees believe their company’s performance management practices motivate them, only 29% of employees strongly agree that their performance reviews are fair, and only 26% believe they are accurate, per Gallup research.
And it’s worth noting that employees often outright hate how performance management practices are handled. Twenty-two percent of employees have actually called in sick rather than deal with a performance review, and 85% say they would consider quitting if they were reviewed unfairly.
Those are dismal numbers, yet effective performance management is key to boosting results.
So while many organizations deal with the frustration by scrapping performance reviews altogether, good, strategic performance management can be transformative. For instance, companies whose employees receive regular feedback have 14.9% lower turnover rates and 8.9% greater profitability.
The problem is that most performance management practices, including performance reviews, are poor or outdated. "The performance management design itself is not evolving as quickly as the objectives and the purpose that we have set out for what we want it to do," Lesli Jennings, a senior director at WTW, told the Society for Human Resource Management (SHRM).
The Problem: Why Traditional Performance Reviews Fall Short
Infrequency, arbitrariness, and a lack of connection with actual performance undermine most approaches to performance reviews.
Infrequency: For one thing, performance reviews are often too infrequent to do any good. Half (49%) of organizations provide only annual or semiannual reviews, per software company Workhuman. This means feedback is often coming far too late for the employee to take corrective action.
Arbitrariness: Then, annual reviews with vague ratings, unclear expectations, or subjective judgments limit improvement. One study had colleagues and peers cross-review performance ratings among 5,000 managers in a variety of industries. They found 65% variance in ratings, meaning two-thirds of these cross-reviews came to a different rating.
Irrelevance: An even more shocking result from that study: only a quarter of the performance reviews even addressed how well the person actually performed! If the review isn’t relevant to the work they do, it will do nothing to improve outcomes.
The Solution: Performance Review Best Practices
The most successful organizations anchor reviews in a few consistent principles:
1: Ask what your reviews are really for.
“I feel like the conversation about how to improve your career, what the expectations are for your job and what it will take to get to the next level are all things you can do without a rating,” Brian Birmingham, a manager at game developer Blizzard Entertainment, told SHRM.
He’s right in a lot of cases, but here, performance reviewing gets complicated. Sometimes these reviews are about “how to improve your career” or “what it will take to get to the next level.” But sometimes they’re about determining promotions, bonuses, training needs, or who to lay off.
If you can do without ratings, great. But the reason ratings persist is because sometimes they’re a necessary evil. The first step in any change to a performance review process is to identify what you need the performance reviews to do. Only then can you create a process that will reliably meet your needs.
2: Define what success looks like.
This includes job expectations, ethical standards, and behavioral norms. Clear definition reduces bias and ensures that any selected employee evaluation examples will be tied both to observable behaviors and predetermined expectations.
“In ongoing work with their employees, managers must first make clear the standards by which performance will be judged: what's important and how much you expect,” argues SHRM in its guide to performance reviews.
3: Prepare early.
Effective performance review best practices emphasize detailed observation, objective data, and planned time for conversation. High-quality preparation allows for fact-based coaching and helps managers distinguish between skill gaps, motivation issues, and job-fit concerns.
4: Get specific.
Generalized feedback is often too vague, abstract, or ambiguous to be genuinely useful. In fact, it often suggests the manager is making a broad judgment about the employee, which can be off-putting and upsetting. Instead, identify specific employee evaluation examples, e.g., actions, incidents, or outcomes where improvement is needed.
5: Include some form of root-cause analysis.
This analysis, in turn, can point toward potential solutions. For example, perhaps the employee’s work produced errors because they lack the necessary skillset, and training and coaching will help. Or perhaps they are unmotivated; are they working under a compensation and incentive plan well-matched to the work they perform and their capabilities?
The manager can start this analysis on their own, but ultimately the discussion of “why did this happen, and what can we do about it?” should include the employee as well. In fact, every performance review should be collaborative with the employee, not dictatorial.
6: Frame the review in a positive, forward-looking way.
One study found that framing feedback in a positive way (“a positive buffer”) can dramatically improve its impact on the reviewee. Specifically, the statement “I’m giving you these comments because I have high expectations, and I know you can reach them” made otherwise negative feedback 40% more effective. Sometimes delivery matters more than the content of the feedback.
In line with reframing how we think about or deliver performance reviews, Gallup even suggests calling these “progress” rather than “performance” reviews. The idea is that these reviews are more effective when they are achievement- or outcome-oriented. Framing them around progress keeps the focus on positive improvement around the work itself.
7: Make formal performance reviews just one part of an ongoing cycle of feedback.
Strategic performance management works best when feedback is ongoing. Employees want to talk about progress regularly, not just once a year. Weekly or monthly touchpoints resolve problems early and turn the review itself into a meaningful milestone.
8: Get help.
Plainly stated, getting performance reviews right is as tough as getting them wrong is easy. As a result, getting some outside help can make a world of difference. A PEO, for example, can provide coaching for leaders, guidelines for performance review best practices, and frameworks for strategic performance management that scale with the business.
FAQ: Performance Reviews That Drive Results
If you want to strengthen your review process and build a culture of performance and development, CoAdvantage can help. CoAdvantage, one of the nation’s largest Professional Employer Organizations (PEOs), helps small to mid-sized companies with every aspect of HR administration, benefits, payroll, and compliance. Contact us today to explore how our workforce management solutions can elevate your next review cycle.
**The information provided on this website is for general informational purposes only and does not constitute legal advice. While we strive to ensure the accuracy and completeness of the information, we make no guarantees about its correctness, completeness, or applicability to your specific circumstances. Laws and regulations are subject to change, and you should consult a qualified legal professional before making any decisions based on the information provided here.
