Are they still an effective management tool?
The annual performance review, which has been part of the American workplace for almost a century, is evolving in the digital age. While some high-profile corporations such as Adobe, Deloitte and GE have garnered attention for announcing they will no longer use yearly reviews to evaluate employees, the practice remains intact at most mid- and large-sized companies. Performance reviews remain popular because they are widely considered an effective tool for determining promotions, salaries and bonuses – and also for encouraging underperforming workers to improve and shedding those who do not. Because these reviews can improve performance by requiring managers to communicate their expectations and goals, many companies now do evaluations more than once a year and have added elements such as informal conversations – sometimes called check-ins – to the process.
Key takeaways include:
Performance reviews entered the business world after they were already a standard practice in the U.S. military, but have changed with the times, reflecting popular cultural trends and the latest theories of human behavior.
In recent years, many companies, including GE and Microsoft, have stopped using forced rankings, a once-popular system in which managers have no choice but to give a pre-determined number of workers the lowest ratings.
Internet-based companies such as Facebook and Warby Parker have modernized the review process so that the reasons for pay raises are clearer, managers do not discriminate against women and the approach is less top-down.
Resources for Further Study
Culbert, Samuel A., “Get Rid of the Performance Review!” Business Plus, 2010. A business school professor argues that the traditional performance evaluation has outlived its usefulness and should be replaced with a system that focuses on coaching and improvement.
Hsieh, Tony, “Delivering Happiness: A Path to Profits, Passion, and Purpose,” Grand Central Publishing, 2010. In this best-selling book, the CEO of online shoe retailer Zappos makes the case that companies looking to succeed today must invest in workers’ happiness.
Kahneman, Daniel, “Thinking, Fast and Slow,” Farrar, Straus and Giroux, 2013. A winner of the Nobel Prize in economics discusses his research, including the study of rating systems, to explain how bias affects assessments and how to make better choices in and out of the workplace.
Michaels, Ed, Helen Handfield-Jones and Beth Axelrod, “The War for Talent,” Harvard Business Press, 2001. The authors of a headline-grabbing McKinsey study explain how companies must relentlessly pursue, retain and develop the most effective leaders to remain competitive.
Beard, Alison, and Dan McGinn, “Performance Reviews,” Harvard Business Review, June 29, 2018, https://tinyurl.com/
Dishman, Lydia, “The complicated and troubled history of the annual performance review,” Fast Company, Nov. 7, 2018, https://tinyurl.com/
Eichenwald, Kurt, “Microsoft’s Lost Decade,” Vanity Fair, August 2012, https://tinyurl.com/
Welch, Jack, “‘Rank and Yank’? That’s not how it’s done,” The Wall Street Journal, Nov. 14, 2013, https://tinyurl.com/
Reports and Studies
“The Real Impact of Eliminating Performance Ratings: Insights from Employees and Managers,” CEB, 2017, https://tinyurl.com/
Cappelli, Peter, and Martin Conyon, “What Do Performance Appraisals Do?” National Bureau of Economic Research, July 2016, https://tinyurl.com/
Culbertson, Satoris S., Jaime B. Henning and Stephanie C. Payne, “Performance appraisal satisfaction: the role of feedback and goal orientation,” Journal of Personnel Psychology, January 2013, https://tinyurl.com/
Fishbach, Ayelet, Tal Eyal and Stacey R. Finkelstein, “How Positive and Negative Feedback Motivate Goal Pursuit,” Social and Personality Psychology Compass, 2010, https://tinyurl.com/
The Next Step
Burkus, David, “How Adobe Structures Feedback Conversations,” Harvard Business Review, July 20, 2017, https://tinyurl.com/
Rissell, Matt, “Performance Reviews Suck, Here’s What We Do Instead,” Forbes, May 26, 2017, https://tinyurl.com/
Staley, Oliver, “A kinder, gentler Microsoft is replacing feedback with ‘perspectives,’” Quartz, Sept. 10, 2018, https://tinyurl.com/
BasuMallick, Chiradeep, “4 Steps to Modernizing Performance Management, the People-first Way,” HR Technologist, March 28, 2018, https://tinyurl.com/
McGregor, Jena, “Everything you know about giving feedback at work could be wrong,” The Washington Post, Feb. 20, 2019, https://tinyurl.com/
Rascoff, Spencer, “How to Upgrade Your Company’s Performance Reviews,” Inc., Feb. 19, 2019, https://tinyurl.com/
Association for Talent Development
1640 King St., Alexandria, VA 22314
A membership organization that supports professionals who seek to improve worker performance, skills and knowledge.
Bureau of Labor Statistics
2 Massachusetts Ave., N.E., Washington, DC 20212-0001
An arm of the U.S. Department of Labor that collects, analyzes and distributes comprehensive information on workers, the workplace and the economy, including the monthly jobs report.
National Association of Personnel Services
78 Dawson Village Way, Suite 410-201, Dawsonville, GA 30534
A lobbying group for staffing professionals that provides education and standards of practice for members.
National Bureau of Economic Research
1050 Massachusetts Ave., Cambridge, MA 02138
A private, nonprofit organization that publishes studies, reports and data for businesses, lawmakers, universities and the media.
Office of Personnel Management
1900 E St., N.W., Washington, DC 20415
The U.S. government agency responsible for helping federal departments hire, supervise and retain public employees. It provides guidance on administering performance management programs and complying with labor regulations.
Society for Human Resource Management
1800 Duke St., Alexandria, VA 22314
The largest organization of human resource professionals, providing research and training for about 300,000 members and lobbying lawmakers.
Society for Industrial Organizational Psychology
440 E. Poe Road, Suite 101, Bowling Green, OH 43402
A group working to advance the field of industrial and organization psychology and improve worker performance and satisfaction through conferences and research.