Why Performance Reviews Won’t Die: A deeply flawed idea lives on despite strong evidence to the contrary

In the news recently is word that two prominent companies, Meta and Microsoft, laid off thousands of its lowest performers, the latter reportedly doing so without severance or continuation of health benefits. The news comes as a shock. As a former Microsoftie, I was there (in the 2000s) when we worked hard to eliminate the Jack Welch-hype dogma of stank ranks and annual culls of the bottom 10%.

?Despite our best efforts, here we are, back to the future.

?“I’ve decided to raise the bar on performance management and move out low performers faster,” Meta’s Mark Zuckerberg wrote recently, according to Fast Company.?

This eye-brow-raising quote is noteworthy for its dubious validity. What Zuckerberg, and the many other companies who will now follow suit (corporations are lemmings; see below) miss is that the entire concept of performance management, and the performance evaluation process at its center, is deeply flawed.

?We have now almost half a century of research on the effectiveness of performance reviews in all its various methods and guises. [1] There is a clear consensus:?

Performance appraisal and rating systems mostly don’t work. The only thing researchers differ is on what to do about it.

Basing mass layoffs on performance reviews is not supported by the science and is ethically suspect. Leaving aside the obvious fact smart people in organizations do stupid things, why do we persist??

It’s complicated.

This article is a short review of why it’s complicated and what should be done. I also give my own recommendation. For those interested in non-derivative sources, I provide a full bibliography at the end.

The Problem

Organizations need to perform. This requires (arguably) individuals to perform and perform well. The evaluation of individual performance therefore (arguably) is indispensable. Additionally, the vast majority (89%) of companies link compensation to performance ratings.[2] Per above, many make economic decisions on this basis as well.

The problem is in asking employees for increasingly higher levels of performance and productivity we’ve created the opposite: [3]

• Most employees don’t find performance appraisals and ratings valuable or motivating.
• Most managers are incapable of? rating without bias, ulterior motives, political or broader contextual considerations, even when trained and prompted not to do such things.
• Most organizations make material, life altering, and in some instances corrupt decisions about employees -- and their future viability as enterprises -- based on flawed assumptions and problematic data.

If the research on performance management was used to solve marketing, financial accounting, or engineering problems, organizations would not do performance reviews as they do today.

As put by Seymour Adler at Aon and his colleagues: “ it is not realistic to think that any intermittent activity-driven evaluation system will necessarily compel more effective performance management behavior or, ultimately, improved job performance.”[4]

In other words, the performance review and rating process is our Frankenstein monster.

What Performance Reviews Assume ?

The problem is performance evaluation is premised on (at least) 7 problematic assumptions:

1. If people get feedback they will improve. This is a basic premise of virtually all performance management approaches. The assumption comes from labor economics and game theory. Unfortunately, the research doesn’t always hold up. Some studies show evaluating performance does improve performance; other research suggests it hurts motivation and performance, especially in collaborative environments or if ratings are tied to compensation. At best, performance evaluation is a mixed bag, best if disaggregated from pay, and highly – highly – context dependent.[5]
2. Employees want to be rated. Managers tend to assume employees want to “know where they stand”. People compare themselves with others, and people generally think they are above average. That said, research shows that while people say they want to know how they fare against performance ratings, given the opportunity to choose between a job where performance is evaluated and one where it is not, most choose the job without performance ratings.[ii] There is also ample evidence employees dislike giving or receiving performance feedback. In addition, the feedback they get is often inconsistent and unreliable, or if reasonably accurate, its effects are inconsistent: sometimes it improves performance, sometimes it makes things worse, and sometimes it has no impact.[6]
3. Managers can accurately evaluate employees. There is no such thing as an accurate performance evaluation. Think about it: accurately evaluating someone’s performance requires observing and remembering their performance and its effects and impact over time by collecting data on that person. Then, usually with no or little training, you must sift through what’s relevant as input and aggregate and synthesize all of it to make a judgment about them. You must exclude irrelevant information, control for others’ biases, understand political agendas, consider the organization or market context, figure out personal motives, and suspend all biases and similar tendencies in judgment of your own while doing all of this.[7] It’s a big ask.

Why? Because we are human.

Take biases. Many studies show all of the biases below can be present in any given performance evaluation, even when raters are trained:[8]?

• Age, gender, race
• Physical appearance
• In group, out group membership (e.g. the ratee is not well known or accepted in the group)
• Politicking (e.g. a specific rating is given because it is politically advantageous for the rater, or disadvantageous/advantageous for the ratee; a harsh review is not given to someone favored by the CEO)
• Impression management (e.g. the ratee performs at his best for you or senior management, but not with others -- but you don’t know this)
• Gaming the system (e.g. inflating ratings to maximize a reward increase; depressing ratings “to send a message”)

Bias is a fact of human judgment, no matter how much we try and mitigate it through technical or administrative means.

4. Improved tools, such as better rating forms or scales, improves the rating process. Major efforts over many decades have been devoted making rating scales clearer and ratings more reliable and valid, including by me – I spent 25 years developing competency models. The effects of these efforts have been dismal, so much so that researchers Landy and Farr (1983), both of whom had published numerous articles on the development of behavior-based rating scales, called for a moratorium on further rating scale research. Behavioral scales might have face validity, but in the hands of actual managers those advantages disappear due to

• Inconsistent understanding of language, and difficulty in applying in global organizations
• Interpreting the behavioral descriptors to suit own ends
• Rating scale discrepancies – my “4” is not your “4”
• Overengineered review forms that try and satisfy multiple objectives (e.g., rewards, development planning, succession, legal compliance).
• Rating guidelines that are often confusing, poorly understood, or inconsistently applied
• Making ratings fit distribution curves, which dilutes their accuracy and validity
• Halo effects based on performance dimensions. For example, if I am rating (e.g.) analysis, strategic thinking, customer communication, and attention to detail, I rate someone high (or low) on one dimension because I rate them high (or low) on the others. [9]

Even well-designed appraisal systems have unintended consequences: one study showed that better-designed systems experienced higher appraisal-related discrimination complaints, contrary to expectations! [10]

5.???? If we train our managers, they will give better performance reviews. The working hypothesis in most efforts to improve the quality of performance ratings is that raters lack knowledge or the tools to accurately evaluate performance. Research suggests the opposite: managers usually know what to do. The more likely reasons are personal and social: the raters’ motivation, personal goals, politics, and normative pressures, per above, get in the way.[11]

6.???? Performance evaluations are context free. Variables other than job performance have a clear influence on performance ratings. For example, societal factors like the state of the economy, the labor market, the political environment (i.e. today’s political climate), or the organizational context (the cultural reference system of the firm and its dominant logics, such as an excessive focus on risk aversion or short term financial performance) may skew ratings. Other factors include overall trust in the organization, such as the fear ratings may be used for political ends, or a dysfunctional senior leadership team, or fear that leadership will change your ratings.[12]

7.???? Performance management FOMO. Companies imitate other companies in order to seem legitimate. Relationships among senior leaders who are members of each other’s boards also contribute to conformity and imitation. Companies’ slavish adoption of GE’s forced ranking systems in the 1990s is a good example.[13]

Performance Management: A Lose-Lose Proposition

From the above it can only be concluded that performance reviews, and the performance management process overall, represents the ultimate lose–lose scenario. It is extremely difficult to do well. This is why many companies in the last 10-15 years abandoned performance ratings and reviews altogether, or significantly modified them (e.g., Accenture, Deloitte, Microsoft, Gap, Inc., Eli Lilly).[14]

?And yet, here we are in 2025 with Meta, Microsoft and others reverting to a failed construct...

Why Do We Still Have Performance Ratings & Reviews?

The counter argument to doing away with reviews and rating consists of the following:

1.????? Performance is always being evaluated whether we know it or like it or not. Even organizations promoting a so-called “development culture” and moving away from ratings still make judgments of where people are in their professional growth. Development conversations always start with a picture of where the person is now, where they are going, and the actions needed to close “gaps”. The “where they are now” is a judgment based on some evaluation scale, even if highly personal. Like it or not, performance evaluation by supervisors or other knowledgeable sources (e.g. peers) remains the best bet for obtaining useful measures of performance or development. [15]

The counter to that argument is yes, indeed. But when learning is the goal and not pay, or job security, these evaluations are much less fraught with bias and the issue listed above.

2.???? It’s the best we’ve got: Despite their imperfections, performance reviews and ratings are the only feasible method for evaluating performance.

The counter to that argument is cop-out! Organizations aren’t thinking hard enough about the problem or are too risk-averse to challenge prevailing institutionalism (see below).

3.???? We can quantify performance: Using purely quantifiable measures, such as? absenteeism, production counts, or sales calls, are almost always deficient except in jobs where performance is absolutely quantifiable (like some sales roles). Most knowledge work does not lend itself to such measures, even with AI brought to bear. The true impacts of performance are hard to measure, let alone quantify.

4.???? We can rate more frequently or use relative ratings. Frequent informal feedback, something several companies have moved to, is sometimes held as a viable alternative. The problem is establishing the job relatedness of informal feedback is difficult, and eliminating the bias and context effects in informal evaluations remains a problem. Meanwhile, a 2014 Corporate Leadership Council paper surveyed over 10,000 respondents and concluded that Millennials are particularly motivated by relative, rather than absolute, performance feedback. In other words, comparing themselves with the broader population. Such a normative system might have merits and is worthy of more study (and see below), but doesn’t eliminate the inherent biases when humans make judgments about other humans.

Do Organizations Really Want to Improve Performance Reviews?

Decades of research and hundreds of articles, chapters, and books seem to have little impact on the way reviews are done or how the information is used. This has led several researchers to suggest maybe organizations do not want to solve the problem.[16]

?Performance Management is a Labor Cost Tool

I see this a bit differently. Corporations view performance management, and the assessment systems at its center, as an?economic lever, another way to manage and mitigate the economic and legal risks associated with the most expensive item on the corporate balance sheet, people.

Most companies stay with rating systems because they don’t know what else to do, and because ratings are perceived as useful inputs – rightly or wrongly – to other processes, especially compensation. How organizations distribute rewards and make promotion and termination decisions without performance reviews and ratings is a solvable problem, but one which the most corporations don’t want to really solve because it easier, economically, legally, and institutionally, to keep doing the same kinds of things regardless of what half a century of research may say.

What Works?

There are more effective ways to assess performance than the approaches described above. That said, every method and approach has its limitations and downsides. No approach is above the vicissitudes of human frailty: we are social animals, subject to the emotional and psychological forces of living and working in social systems. In plain English: we will never eliminate bias, politics, the need to belong, or the very real existential needs for security that organizational life engenders.

The better alternative, thus, is to work with these forces by understanding and mitigating, or leveraging, their effects.

Performance Evaluation as Personal & Organizational Learning

One way to do that is to reconsider performance management as a learning process rather than an economic one.

The two approaches I briefly touch on have a decidedly developmental focus. Both are premised on the core belief that performance management ultimately should be a developmental process rather than an economic one, AND, doing so does not preclude its use as a way to manage compensation.

The Deliberately Developmental Organization

The first has been brilliantly documented by Bob Kegan and Lisa Lahey in their 2016 book, An Everyone Culture: Becoming a Deliberately Developmental Organization. In it they put forward the “simple but radical” idea that organizations prosper most when they align with a most fundamental human motive: to grow and learn. They profile three organizations where human development is not just a nice thing to do, but an essential strategy for organizational performance. One of those organizations, Bridgewater Associates, is one of the most successful asset management firms on the planet.

Team Calibration as Organizational Development

The other idea is an elaboration of a process we used at Microsoft. By no means perfect, it appeals because it functions as dual process for evaluating performance, mitigating (though not eliminating) bias, while improving the skills of those doing the evaluating. It is an inherently developmental process.

The idea is that at each level of the organization, and/or by function, employees are assessed and their performance “calibrated” based on normatively relevant performance criteria (e.g. productivity, contribution impact; goal achievement; teamwork; coachability; analytical ability; strategic thinking, etc.) relative to their peers. These criteria need not be “perfect” -- there is no such thing – but serve as face-valid benchmarks upon which to base informed conversations. These conversations are had by management teams whose task is to come to consensus on the performance and rating of the groups they collectively manage. Each level of management, thus, does this for their respective teams. Meetings are facilitated by the team leader or an impartial facilitator. The goals of the dialog are threefold: (1) make fair and reasonable performance evaluations and calibration determinations for every employee; (2) allow managers at each level to gain exposure to all team members across departments while also using and testing the criteria by which team members are being evaluated; (3) develop their own assessment and evaluation competence, as well as that of their peer managers, through dialog, debate, and consensus.

As this process repeats over time, managers, and the organization as a whole, improve in evaluation.

Of course, there are downsides: this approach takes time and planning; in large organizations it requires a lot of meetings; the information roll-ups require organizational orchestration; meetings require skilled leadership and facilitation; and – of course – it too is subject to cultural overlays. A toxic system will turn this process toxic (as it will every other). A risk averse or overly collegial system will avoid having honest conversations. Group think may prevail. And on.

But the pluses outweigh the minuses. Performance evaluation can become an organizational learning opportunity, and the natural human tendency for bias, politicking and impression management is mitigated by the normative effects of a peer group whose ultimate goal is improvement and learning.

Will a Rising Tide Float All Boats...?

Economic entities will always have the right to manage their cost structures, which include the right to fire people and eliminate jobs. Using the performance management system to do so, and the appraisal process at its center, is a fool’s errand, as well as ethically suspect. Not because people and organizations are evil or ignorant, but because humans, as social animals, are inherently fallible, as such full of bias and self-interest. Let’s not fight human nature. Let’s channel it to a more productive end focused on a mutually compatible goal: organizational and individual development.

[1] Performance management and performance review are not the same thing – “performance management” refers to the entire process of setting goals, determining the basis of performance evaluation, evaluating actual performance, and assigning compensation and rewards. The performance review is usually the focal event determining the evaluation and reward.

?[2] Mercer, 2013.

[3] See Adler, Campion, Colquitt, Grub, Murphy, Ollander-Krane, & Pulakos, 2016; Austin & Villanova, 1992; ?Blanes i Vidal and Nossol, 2009; Connelly, Tihanyi, Crook, & Gangloff, 2014;? DeNisi, 2006;? DeNisi, Cafferty, & Meglino, 1984; Landy & Farr, 1983; Milkovich & Wigdor, 1991; Murphy, 2018; Murphy & Cleveland, 1991, 1995; Pulakos & O’Leary, 2011.

[4] See Adler et al, 2016

[5] See Bernardin & Beatty, 1984; Casas-Arce & Martinez-Jerez, 200

[6] See Meyer, 1980; Barankay, 2011.

[7] See Cleveland, Murphy, & Lim,2007; Murphy & Cleveland, 1991, 1995; Kluger & DeNisi, 1996

[8] Adler et al, 2016

[9] See Cook, 1995; Cleveland & Murphy, 1992; Longenecker, Murphy & Cleveland, 1995; Tziner & Murphy, 1999;

?[9] See Beck, Beatty, & Sackett, 2014; Scullen, Bergey, & Aiman-Smith, 2005; Olesen, White, & Lemmer, 2007; ?Smith & Kendall, 1963; Latham & Wexley, 1977; Murphy, Martin, & Garcia, 1982; Landy and Farr (1980); Facteau & Craig, 2001; Harris & Schaubroeck, 1988;

[10] Rubin & Edwards, 2020

[11] Murphy & Cleveland, 1991, 1995

[12] DeNisi, Murphy, Varma, & Budhwar, 2021; Grey & Kipnis, 1976; Murphy & Cleveland, 1991, 1995; Aguinis & Pierce, 2008; Ferris, Munyon, Basik, & Buckley, 2008;

[13] Pfeffer, 2007; White, 2021.

[14] Culbert & Rout, 2010; Cunningham, 2014

[15] Adler et al, 2016

[16] Banks & Murphy, 1985; Murphy & Cleveland, 1995

?

References

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2.????? Aguinis, H., & Pierce, C. A. (2008). Enhancing the relevance of organizational behavior by embracing performance management research. Journal of Organizational Behavior, 29, 139–145.

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4.????? Banks, C., & Murphy, K. (1985). Toward narrowing the research–practice gap in performance appraisal. Personnel Psychology, 38, 335–345.

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7.????? Bernardin, H. J., & Beatty, R.W. (1984). Performance appraisal: Assessing human behavior at work. Boston, MA: Kent.

8.????? Blanes i Vidal, J., & Nossol, M. (2009). Tournaments without prizes: Evidence from personnel records. Paper presented at the CEP Labor Market Workshop, Centre for Economic Performance, London School of Economics and Political Science, London, United Kingdom.

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