How to Conduct an Effective Employee Performance Review

Employee performance reviews can be stressful for workers and managers alike. Now more than ever, with workers quitting their jobs in droves as part of the “The Great Resignation,” managers may be hesitant to provide direct, constructive criticism that could be perceived as overly harsh. Employees, in fact, widely agree that most performance reviews do more harm than good. This is partly due to the traditional approach of performing reviews too infrequently to be truly effective.

Instead of annual performance reviews, some companies are moving to a model of providing feedback on a rolling basis throughout the year. Whatever frequency you choose for providing employee feedback, you should have a plan for getting the most out of performance reviews. Many experts advise that your approach to appraisals should correlate with company-wide goals and emphasize learning above accountability.

CHALLENGES WITH THE CURRENT APPROACH TO ANNUAL PERFORMANCE REVIEWS

DOES ANYONE LIKE ANNUAL PERFORMANCE REVIEWS? THE ANSWER, IT APPEARS, IS A RESOUNDING NO.

While many companies still conduct yearly reviews, managers, workers, and human resources (HR) leaders all seem to think that they are outdated and ineffective. This rare cross-organizational agreement stems from the perception that annual performance reviews create tension because of their forced rankings, waste time with the added paperwork, exacerbate workplace tensions between managers and the rank and file, and do not lead to better worker performance.

A few statistics help underscore the predominant views on performance reviews:

• According to management research firm CEB, as reported by the Washington Post, 95 percent of managers are dissatisfied with how performance reviews are typically performed, and 90 percent of HR leaders say the review process does not produce accurate information.
• Performance reviews often emphasize constructive criticism, but a Gallup poll indicates that only about 10 percent of employees who receive negative feedback end up feeling more motivated, while the other 90 percent feel actively disengaged following negative feedback.
• The same Gallup poll found that negative feedback caused about 80 percent of workers to look for other employment.
• It is tough to get the most out of employment reviews when managers are not confident in their ability to give feedback. Only about 15 percent of managers polled by Gallup strongly agree with the statement “I am effective at giving feedback to others.”
• Not only are performance reviews generally ineffective, they are also a huge time sink. CEB discovered that the average manager spends close to five full work weeks (about 210 hours) doing work related to annual employee reviews.

In short, your business may be spending thousands of hours per year, wasting valuable time and money, on a process that nobody really likes or finds valuable. And it may not be just a waste of time—it may be actively harmful.

THE NEW APPROACH TO PERFORMANCE REVIEWS

A recent report from the U.S. Labor Department found that 4.5 million people quit their jobs in November—the highest number on record. The so-called Great Resignation is spawning a talent war that is allowing workers to be choosier than ever. Today’s workers, and young workers in particular, have different expectations for work, including performance reviews. Companies that insist on doing things the same old way risk alienating them.

None of this means that feedback is not important or useful. Employees need to know how they are doing and how they can improve. Performance reviews should not be scrapped altogether. But they should be reimagined. That is what a lot of the most progressive companies are in the process of doing.

Importantly, workers are not saying they do not want feedback. A survey from PricewaterhouseCoopers (PwC)—one of the companies leading the movement away from annual performance reviews— found that about 75 percent of workers find feedback valuable. The disconnect, then, is in how that feedback is given. PwC found that about 60 percent of respondents want feedback on a daily or weekly basis. For employees under age thirty, that number increased to 72 percent.

One of the biggest criticisms of annual performance reviews is that they occur too long after the fact. Feedback is not as useful when it lags behind completed projects by weeks or even months. Regular feedback—as often as weekly —can be a more effective means of communication. It does not have to be formal either. For example, Accenture, another company that is dispensing with annual reviews, told the Washington Post that it plans to implement a system in which employees receive feedback from managers upon the completion of assignments.

About one-third of US companies are replacing the traditional appraisal process in favor of what the Harvard Business Review calls “frequent, informal check-ins between managers and employees.” Early adopters include Adobe, Dell, Microsoft, IBM, PwC, General Electric, and Deloitte. SHRM says that this model of continually providing real-time feedback throughout the year “is reflective of how work actually gets done and leads to increased engagement.”

HOW TO GET THE MOST OUT OF PERFORMANCE REVIEWS

Scrapping performance reviews altogether probably is not a wise move. You do not do your employees or your organization any favors by coddling workers and avoiding confrontation. At the same time, simply going through the motions of an annual review process that most people dislike or find useless is not helpful either. To get the most out of your organization’s performance reviews, take some time to rethink them with an eye toward achieving specific goals.

• Driving better employee performance. The intent of performance reviews—whether annual or weekly—is to improve the performance of your workforce. It is becoming increasingly clear that traditional reviews do not achieve this goal. You can find inspiration in what forward-thinking companies are experimenting with and also generate your own ideas based on firsthand experience with your workers.
• Building culture. Every employee interaction is an opportunity to reinforce your company’s core values and strengthen its culture. The stronger your workers, the stronger your company. Company goals should align with worker goals. If you are not clear on the former, it will be difficult to provide meaningful employee feedback. For example, if a company met its goal of rolling out a major new product or service, you can couch feedback in the context of how each individual contributed to that goal.
• Meaningful metrics. A company cannot thrive on pie in the sky alone. There has to be some substance and specificity to the feedback you give workers, but that does not mean you have to rank workers or grade them along a distribution curve. You can, however, base your reviews on quantitative measures rather than purely subjective ones. While performance reviews cannot be solely data-driven, you can standardize tasks to some degree as a way to measure performance and unmet potential.
• Human touch. When so much is done virtually in today’s workplaces, a little human touch can go a long way. A performance review that is not accompanied by a face-to-face meeting can seem cold and impersonal. This is one aspect of work that should be done in person, or at the very least, via a video conference. The blow of criticism can be softened by empathy and compassion for challenges the worker might be facing. Give the worker time to tell their side of their story. You can even encourage them to reflect on their performance. Above all, listen, and learn from your workers. If they feel they can be honest with you, it will go a long way toward developing a performance review system that helps individuals and the company at large.

Contact a New York City business attorney at The Browne Firm to find out more about employee reviews. Give us a call at 914-430-4348.

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