“All one can measure is performance. And all one should measure is performance,” wrote Peter Drucker in his timeless classic on effectiveness. Yet the common performance measurement system of most companies – the annual performance review – seems to measure everything but performance. So it shouldn’t be surprising that many businesses are considering disbanding this seemingly outdated process.
Everyone complains about performance reviews. They’re awkward. They’re biased. They’re a waste of time.
They’re watered down. They’re out of date. They’re full of offensive profanity.
So there’s no doubt that something needs to change. But if you ask people, the only solution anyone that comes up is to eliminate them altogether.
Except this isn’t the answer.
For one thing, even when companies eliminate performance reviews, ratings still exist. No company can have an effective talent management program without a succession planning system. So management will always have some method of rating talent and potential across the organization.
In these cases, the ratings just become invisible to the employees. They lack employee input and discussion. And because there’s less transparency, they’re much more susceptible to bias.
Discrimination tends to hide in dark places. So would you prefer that these evaluations are done with employee visibility, or without it?
But second – and more importantly – performance reviews aren’t a lost cause. They can be an effective tool. We’re just using them for the wrong purpose.
Wait, What’s the Point of Performance Reviews Again?
In the early 1900s, the U.S. military had a problem – it needed to better identify and dismiss poor performers. It also needed to recognize which soldiers had the capacity to be promoted into officer positions – decisions that often needed to be made quickly on a battlefield, without a lot of time available for interviews and deliberation.
So they devised a merit rating system to identify and report this information. Industry quickly jumped onboard, adopting merit scores to identify promotional candidates and weed out poor performers. And somewhere, a young Jack Welch smiled.
Later, as a shortage of managerial talent caused companies to re-assess their organizational strategy, companies began to focus more on developing their people. As social psychologist Douglas McGregor wrote in a 1957 article,
“It calls for creating a relationship within which a man can take responsibility for developing his own potentialities, plan for himself, and learn from putting his plans into action. In the process, he can gain a genuine sense of satisfaction, for he is utilizing his own capabilities to achieve simultaneously both his objectives and those of the organization. Unless this is the nature of the relationship, ‘development’ becomes a euphemism.”
These three purposes – accountability, succession planning, and development – remain the primary drivers of performance reviews today, over 60 years later.
Except one is much more important than the other two.
Accountability and succession planning – while important and necessary for an organization to survive over the long-term – focus on maintaining organizational stability. They seek to preserve today’s status quo. And as such, they don’t produce results.
Development, on the other hand, and leveraging the potential of the people in the organization, does lead to results. Only through development can we expect our companies to continually grow and adapt in today’s changing world.
In High Output Management, required reading for anyone in a leadership position, Intel CEO Andy Grove writes that the only ways to improve an employee’s output is through motivation and training. There is nothing else. In Andy’s words,
“The single most important task of a manager is to elicit peak performance from his subordinates. So if two things limit high output, a manager has two ways to tackle the issue: through training and motivation.”
Essentially, management becomes a question of whether people are unable to succeed, or unwilling to succeed. One comes down to an issue of training – and the other, motivation.
Which is why performance reviews are such a critical tool. They provide an opportunity to focus on both of these areas – relative skills and gaps to determine training, and alignment between personal aspirations and job responsibilities to improve motivation.
And yet, we’re not using them to exploit this opportunity.
What Behaviors are Your Reviews Reinforcing?
“The greatest thing in this world is not so much where we stand as in what direction we are moving.” – Johann Wolfgang von Goethe
Consider most company performance reviews. First and foremost, are they tools to increase development or hold people accountable?
One focuses on the future. The other on the past.
One focuses on positive growth. The other on minimizing a negative impact.
One focuses on opportunities. The other on problems.
Read through a batch of performance reviews. There’s often a lot of focus on accomplishments and past behaviors. Yet there’s little suggestions on how people could do better going forward.
Most reviews today are designed to, first and foremost, push accountability. The reason is simple. HR defines the process. HR is concerned about the legal liability of documenting performance. So they develop a form that includes as much information as possible in their best effort to protect the company. Which not only puts a huge burden on management, it dilutes focus from the areas that are truly important.
But other than offering a legal CYA, performance reviews are ineffective tools for driving accountability. Very few employees are motivated to perform in May based on the potential impact of a review in December. Long-term, uncertain consequences are simply poor drivers of behavior.
Which is one of the reasons that most people don’t see the benefit of performance reviews. They’re focused towards a purpose that they’re ill-suited to support.
The alternative is to re-focus performance reviews on development. Consider how the process would change if we revised this focus:
Emphasis is placed on future opportunities, and the efforts needed to leverage them, as opposed to yesterday’s problems.
Growth mindsets, as opposed to fixed mindsets, are recognized and rewarded. People are encouraged to stretch themselves and strive for big wins instead of avoiding failures.
The theme is one in which everyone – no matter how talented or exceptional – is encouraged to continue improving. So everyone has new challenges going forward, as opposed to the typical “just keep doing what you’re doing” mentality.
The purpose isn’t to unload every piece of feedback a manager might have, but to improve performance. So the information that’s communicated is limited to the amount of ideas a person can absorb at one time.
The focus centers around having a worthwhile conversation instead of a lecture. So managers give the write-up to employees in advance to facilitate an informed discussion.
The form becomes an initiator to hold a back-and-forth conversation as opposed to the final product. And as such, it’s adjustable following the discussion.
It centers around where people want to take their careers and how management can help them achieve these goals. It aligns the goals of the person with the needs of the company, instead of just pushing company objectives downward.
And most importantly, it recognizes that developmental feedback cannot be given once a year and be effective. So it turns an annual process into a daily one.
Make Performance Reviews a Daily Practice
“Continuous improvement is better than delayed perfection” – Mark Twain
Many companies that are eliminating performance reviews say that they’re replacing them with more frequent feedback discussions.
But while more frequent feedback sessions are great, this shouldn’t be an either-or decision.
More frequent feedback sessions go hand-in-hand with effective performance appraisals. They’re critical for them to be effective. And the fact that these companies haven’t been driving this behavior in the first place, explains why they see their performance reviews as ineffective.
If a manager sits down once a year to offer some developmental advice, after ignoring this topic for the previous 364 days, it’s obvious that he doesn’t care about your development. In that case, he’s simply trying to check the box and meet a company requirement.
But a manager that’s actively engaged throughout the year, has regular conversations on performance and development, and coaches her employees through difficulties, develops the trust and credibility to provide useful developmental feedback. As John C. Maxwell wrote, “People don’t care how much you know until they know how much you care.”
Too many managers seem to believe that their position yields them this credibility. They seem content to rely on their title to gain this level of trust.
Yet titles don’t bring trust. And positions don’t yield credibility. At best, they merely offer a grace period while people wait to see how your actions match your words.
Trust comes from increasing the quantity and the quality of our communication. Quantity is relatively straight-forward, with the notable exception that it shouldn’t be limited to social media messages. Quality comes from taking an active interest in topics that are important to other people. And showing people that we care about their best interest.
We build trust through the day-to-day and week-to-week activities that reinforce our credibility to provide meaningful feedback – particularly feedback that aligns to someone’s interests and goals.
Another way of looking at this is that managers cannot develop a high-quality performance review in the month that it’s due. It needs to be built throughout the year. It needs to be written in the day-to-day and week-to-week activities that provide us with the credibility to take an active role in someone’s development.
Until we can reliably do that, we have no real right to expect employees to value these reviews.
Trust and Credibility is Built with What We Do Every Day
“One can choose to go back toward safety or forward toward growth. Growth must be chosen again and again; fear must be overcome again and again.” – Abraham Maslow
An effective performance review needs to do two things: (1) focus on development and (2) be built off of mutual trust and credibility. Otherwise it’s just paper to fill up a file cabinet in HR.
Unfortunately, too many of today’s performance reviews lack both of these aspects. Which makes it understandable that many companies are clamoring for their removal.
Yet these problems are not insurmountable. And the benefits of maintaining an effective performance review system – including a cultural of continuous growth, management engagement, and worthwhile feedback – far outweigh the costs of supporting it.
It all comes down to the behaviors that we choose to prioritize each day. Are we focusing on development? Are we building this credibility? Or are we just filling out HR forms?
The irony is those who are the biggest advocates of eliminating performance reviews, are the ones who don’t invest in the daily activities to make them effective. Which, I suppose, means they’re the group that needs them the most.
Performance reviews can be an effective tool. We just need to start using them as such. As Andy Grove put it, “Anything less would not be appropriate for the most important kind of task-relevant feedback we can give our subordinates.”