Performance Reviews: Use or Abuse

Are you good at your job?

If you aren’t sure, aren’t you glad that your company has a performance rating system?

Most people would not agree with the above question and in fact dread their performance review. Why? Even though the annual review is based on well-intended reasons, it is based on a problematic philosophy. Unfortunately, most companies aren’t doing enough to improve their performance review system.

The Problems with Performance Reviews

The biggest question with performance reviews is whether a single manager can rate an employee’s abilities through observation alone.

Often the performance rating provides more information about the manager than about the employee. Individual raters have biases which doesn’t help the performance rating system. Some of them are:

Personal bias. The manager sees in the employee what the manager personally likes and how the manager would do things.

Halo effect. If an employee does well in the area that is important to the manager, but not in others that the manager doesn’t care about as much, there is a bias. Maybe the work that the employee is doing isn’t that good, but since the manager likes the area, they may reward the performance, regardless.

The Middle Default. Managers will give most people a “satisfactory rating” because they have a hard time differentiating between the performance of all employees. It takes a lot of work for the manager to see the nuances between each worker.

Leniency and Strictness Bias. Managers tend to have a bias towards the extremes. Many managers will give middling performance reviews even though the employee has ample room to improve, which is a leniency bias. Conversely, the manager can be quite critical with employees and think that nobody is great so why reward them? This is a strictness bias.

Spillover Effect. If an employee did a good job in the past, they will assume that they will also be good employees in the future. A manager makes assumptions about a person’s abilities and how they will perform. They often aren’t willing to modify their initial judgement even when the data says otherwise.

Many companies ask their managers to force rankings, assuming that all teams have high, middle and low performers. That isn’t always the case.

What is the Answer?

Performance reviews can be improved by including reviews from other employees, customers, and various sources. The other option is to have continuous discussions about performance with your employees.

Gallup scientists studied behaviour job requirements in over 500 roles to try to establish which factors provide the simplest and most complete definition of performance that best predicts overall success in a role.?They are:

1. Individual Achievement. These are the responsibilities that the employee must achieve.

2. Collaboration with team members. How well does the employee work with teammates to accomplish success.

3. Customer value. What is the impact of an employee’s work on customers? A customer can be either external or within the organization.?

Gallup has found that leaders and managers should prioritize developing employees to achieve exceptional performance across all three elements. They tested various scales for the three elements and found that having a five-category scale provided the most reliable and valid indication of performance for the following question:

“Please rate this person’s performance in the past six months, based on the following key job responsibilities.”

The best scale uses:?Below Average | Average | Above Average | Outstanding | Exceptional

Notice that ‘average’ is not in the middle and this is to reduce the halo effect and leniency biases. The gradations at the top of the scale allows for improvement over time.

What is the difference between “exceptional”, “outstanding” and “above average”? Gallup defines “outstanding as performance that are one in 10; and “exceptional” is one in 100 in a typical workplace.

Gallup recommends that your leadership team goes through an exercise of determining what “exceptional” would mean in your workplace, and what “outstanding” truly means. This can be used as a method to move people up the scale.

The Best Data for Performance Reviews

To decrease biases in the performance review process, Gallup recommends using three types of data when measuring performance:

Performance Metrics. Set metrics that reflect outcomes such as productivity, profitability, accuracy, safety, or efficiency that are within the employee’s control. Using peer and customer feedback systems can enhance the data.

Subjective Observations. The manager can use subjective/qualitative observations to help the manager to evaluate performance in the context of role expectations.

Individualized Goals. Set goals for individuals that considers each person’s abilities, experience, strengths, and unique job responsibilities along with the general responsibilities of the job.

Using both qualitative and quantitative observations, the results are more reliable and truthful. If subjective ratings and performance metrics don’t align, the manager can review the employee’s performance again. If subjective and quantitative observations match, then it can be concluded that the employee is performing well.

Now that is a performance review system that is worth using to build a great team!

Susan Surtel is a coach that is certified with the International Coach Federation (ICF) and is a Gallup Certified Strengths Coach. She works with leaders who want to lead great teams. You can contact Susan through her LinkedIn?profile ?or through her web site,?www.strengthscanada.com