Performance reviews – bah humbug!

In business, what single conversation causes the most dread and fear on the manager’s side and anxiety and resentment on the employee’s side?

Answer: The performance review!

Second only to firing an employee, managers and business owners rate performance appraisals as the task they dislike the most.

The Ghost of Performance Reviews Past

Giving staff annual performance evaluations has for decades been widely accepted as an essential and valuable management tool, and there are lots of books and materials out there about this topic. But, there is a growing body of research suggesting that performance reviews may do more harm than good, certainly in the way that many are carried out.

In a national study by People IQ, 87% of employers and managers felt performance reviews were neither useful nor effective.

In an analysis published by Psychologists A. Kluger and A. Denisi they concluded that at least 30% of the performance reviews resulted in decreased employee performance.

A study by the Society of Human Resource Management found that 90% of performance appraisals are both painful and don’t work; and further, produce an extremely low percentage of top performance.

This generally negative view of performance reviews is borne out in my own experience of most businesses.

The Ghost of Performance Reviews Present

Working with businesses ranging from small financial practices to large multi-national corporations I’ve observed that they often have better, and even at times very impressive, performance and appraisal systems in place today than they did say 10 years ago. They refer to best practice, link personal objectives to company objectives, use competency frameworks, and look at both deliverables as well as behaviours etc.

Significant investment has gone into this process, so does it work better for them now? Well, not much, in my opinion.

The noticeable improvements I have observed are that annual performance appraisal conversations do now actually take place in medium and large businesses, more so than before. Yet they are not delivering desired improvements in performance. They are often seen as cumbersome, time consuming tick-box exercises that simply must be endured.

The Ghost of Performance Reviews Future

So how can we transform the experience and turn performance reviews into a tool for positive change? I believe there are two aspects that need to be addressed:

  1. The quality of the appraisal conversation itself

  2. The feedback and conversations happening in between appraisals

It’s common for managers to avoid giving timely feedback and to take time to communicate the right message. Positive feedback is often neglected or doesn’t come across as genuine and negative comments run the risk of being confrontational and dispiriting.

Regular conversations about performance and expectations create clarity and a sense of security. They foster the right conditions for continuous improvement making it easier to adjust expectations and respond positively to change.

The formal appraisal should be more of a summary of experiences over the preceding period, rather than a series of surprise observations that have so far gone unmentioned. If feedback is regular the appraisal conversation can focus on more positive development coaching.

Coaching and Performance

Bersin & Associates carried out research around linking coaching and performance management. They demonstrated that

  1. Organisations in which senior leaders coach very frequently had 21% higher business results

  2. Organisations with excellent cultural support for coaching had 13% stronger business results.

This is no great surprise to me.

When leaders are trained as coaches they become skilled and confident in giving feedback to help development. A coaching leader’s mindset is different from that of a directive leader. When giving feedback they are focused on building capability and helping staff develop and learn. They are also more aware of the value of sensitive feedback and become more adept at giving constructive appraisals.

Managers with good coaching competencies have a better ability to listen and build trust. They are equipped to conduct quality conversations and nurture an open positive learning environment. It lays the foundations for good workforce relations, which in turn can lead to improved productivity, reduced staff churn and higher motivation.

We train business owners and managers to become great coaches with the skills to give developmental feedback and improve their team’s performance. If you are interested in finding out more please take a look here.