The most common mistakes of performance review systems that exist today and how to fix them

In today’s workplace, performance is more important than ever. It’s no wonder then that companies are striving to improve the performance of their employees through performance reviews.  But how successful are these performance review systems exactly?

According to a 2014 Deloitte study, companies worldwide are questioning their performance reviews. Only eight percent of companies report that their performance management process drives high levels of value, while a staggering 58 percent said it is not effective.

Not only companies and managers dislike performance reviews, but employees do too. Globoforce, a cloud-based, human capital management software solutions company, found that over half of employees see their performance reviews as inaccurate and unmotivating. Moreover, employees often look at performance reviews with frustration, anxiety and even boredom. Worst of all, 63 percent of people think that performance reviews are not a true indicator of performance.

So, how can you design a better performance review system?

Here, we will look at some common pitfalls in a performance review system and how to avoid these pitfalls and improve your performance review system.

Designing a better performance review system

1. Problem: One of the most common mistakes in a performance review system is that it’s a one-way, top-down process. Managers do most of the talking, while the employee simply listens to the feedback given. There’s not much room for input from anyone else besides the manager.

Solution: Employ a 360-review system, where not only the manager is allowed to give feedback on an employee’s performance. Using self-reviews and peer-reviews allows for a number of different perspectives. This gives the employee more agency in their performance review and allows for more accurate feedback.

Alternatively, there are other ways to measure employee performance through less subjective metrics by focusing on output (e.g. net promoter score of customers, sales numbers or billed hours).

2. Problem: Performance reviews are done on a yearly basis, which is often too little, too late. Much like how a business is constantly changing, employees want a more continuous feedback system.

Solution: Instead of yearly performance reviews have quarterly or even monthly performance reviews. Set a frequency that is practical and reflective of company culture. For some, this can be quarterly reviews. For others, a bi-weekly or even weekly process may work better. Companies like Adobe, Deloitte, and GE are already doing this.

3. Problem: The recency effect. Often, especially when reviews are done on a yearly basis, managers base their performance on how an employee has performed recently. It’s easier for managers to focus on what’s fresh in their mind. However, this overlooks any positive or negative behavior that happened long ago.

Solution: Documentation is key here. Make sure that managers document the performance of an employee throughout the year. When an employee has clear goals, write down how well they performed on those goals on a timely basis. Having clear documentation will help a great dealing in avoiding the recency effect.

4. Problem: Employees often view the performance review as a strict and rigid process. Managers are colder and more distant than normal, especially when giving negative feedback.

Solution: Be positive. The way you approach the conversation is paramount to its success. If your intention is to help the employee improve, the conversation is easier and more effective. It should come from a genuine feeling of wanting to help the employee grow and be more successful in their job.

5. Problem: People have a fear of the unknown. Employees, likewise, often dread performance reviews as they don’t know what’s coming. They are afraid that they will be bombarded with negative feedback and curveballs they never saw coming.

Solution: Encourage an open and honest culture, not just during performance reviews. Performance reviews should be viewed as a summary of previous conversations and meetings. This isn’t the time to pile on all of the bottled up grievances from the past year – it’s the time to reflect back and move forward. Which brings me to my next point.

6. Problem: Managers are focused on the past, not the future. Managers take their time in these performance reviews to look back at past performance, but talking about the past can only get you so far.

Solution: Focus on the future. The same Globoforce study we mentioned earlier, showed that 70% of employees want performance reviews to help them grow and develop. Set attainable goals together with the employee using the SMART system: Specific, Measurable, Achievable, Realistic, and Time-bound. Creating these goals will be beneficial to employees and make the performance review more effective.

7. Problem: Managers can often be vague in their feedback to employees. They frequently hide behind arbitrary numerical grades and don’t give much substance to these numbers. The halo-effect can also be in play here, where the manager gives feedback according to how much they like the employee.

Solution: Again, documentation is key here. Be prepared when you’re going into a performance review. Make sure that you understand clearly how an employee has performed in the past few months through your paper trail. Being able to support your feedback with clear examples helps to create a better performance review. In addition: give lots of feedback.

Conclusion

Love them or hate them, performance reviews are here to stay. Designing a better performance review will help not just the employee, but also the managers and the company as a whole. Performance is critical for today’s workplace, so make sure that your performance review system is up to the standards of today’s fast-paced world.