Dissatisfaction with performance appraisals is pervasive. They are seen as time-consuming, demotivating, inaccurate, biased, and unfair. A McKinsey survey indicates most CEOs don’t find the appraisal process in their companies helps to identify top performers, while over half of employees think their managers don’t get the performance review right. A Gallup study is more negative: Just one in five employees agreed that their company’s performance practices motivated them.
In this blog, I examine performance review best practices and attempt to help managers refine how the process is planned, conducted, and repeated. Following these recommendations can improve employee performance, while also giving managers a more effective structure for how to have these sometimes difficult, but necessary, conversations.
Rethinking Performance Reviews
Rethinking performance reviews should not mean getting rid of this essential managerial responsibility. So, what’s the purpose and key components of an effective performance review process?
The purpose of reviews is two-fold: an accurate and actionable evaluation of performance, and then development of that person’s skills in line with job tasks. For recipients, feedback has intrinsic and extrinsic value. Across fields, research shows that people become high performers by identifying specific areas where they need to improve and then practicing those skills with performance feedback. Multiple career studies indicate the importance of on-the-job versus other types of experience. One study from as far back as 1988 (and updated 20 years later with similar results) found that work experience (job assignments, organizational relationships, and especially performance feedback) accounts for about 70% of the professional-development learning relevant to career advancement, with about 15% each for formal training courses and life experience (hobbies, interests, family: the other things you do and love outside work).
What to Do Before the Review
In ongoing work with their employees, managers must first make clear the standards, including ethical standards, by which performance will be judged: what’s important and how much you expect. This may seem obvious, but it’s often not done because new managers are unsure or uninformed about how unit goals align with strategy; because experienced managers may have lost touch with market or strategy changes; or because over time turnover in management results in mixed signals about performance.
Performance reviews are about what people do for a living and often their pay and job assignments. These important topics take time to discuss. You must make time on your calendar to avoid quick reviews that leave people feeling confused or unvalued. Managers must also take the time to pay attention to peoples’ behaviors far in advance of the actual review date if they’re going to be helpful about the impact of those on-the-job behaviors on others in or outside the organization. You want people focused on the relevant causal relationships and not just enacting the natural human tendency to ascribe credit for good outcomes to oneself and the causes of bad outcomes to someone or something else.
What to Convey During the Review
Here are five steps useful in guiding a performance review conversation:
Convey Your Positive Intent
A review is about feedback aimed at increasing the recipient’s effectiveness. If you don’t really have this intent— for example, if you believe that issues of motivation and/or ability overwhelm the potential contribution, then you’re not really having a performance conversation, and you can ignore the following steps. The conversation you should have is one in which you discuss moving that person out of that job.
Describe Specifically what You have Observed
The more specific and descriptive your feedback about strengths and weaknesses, the more likely the other person will understand. Describe illustrative or critical incidents which indicate the impact on performance. Too much performance feedback is of the “do good and avoid evil” variety. That may sound harmless, but overly general feedback increases feelings of defensiveness, rather than openness to behavior change, because it involves broad judgments and invites counterpunching rather than discussion.
State the Impact of the Behavior or Action
Many employees are unaware of the impact of their actions on outcomes. That’s why we have managers. But managing means discussing cause-and-effect linkages between behaviors and outcomes. For example, it’s one thing to say to a salesperson, “You didn’t connect with the buyer.” It’s quite another to say, “You interrupted people throughout the meeting, and this resulted in that buyer being less open to listening to your ideas.”
Ask the Other Person to Respond
Effective reviews are a two-way transfer of information, not only directions from a manager. Most people want to know about their performance. But the Rashomon effect is alive and well in firms; two people can observe the same event or outcome yet interpret it differently.
So What? Now What?
A review is incomplete without a discussion of next steps in which both parties take appropriate responsibility for change options. But responsibility for this closure rests with the manager. On what assets can you capitalize to increase effectiveness? Are there assignments that can increase learning, deliberate practice, or other elements relevant to core tasks? Can HR help? What is the timetable and benchmarks to use in measuring progress after the review?
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What to Do After the Review
The biggest impact from performance conversations is often what happens after the review. Too often, nothing happens: The review is an isolated annual event and therefore has little real impact. But research on behavioral change and the continuous improvement required for innovation highlights the importance of setting goals and providing ongoing feedback about progress toward goals.