How companies can make performance reviews fair by using data

Rather than relying on subjective feedback, employers should look at metrics that provide more accurate insight.

The author

Jim McParlane, Managing Director APAC, Anaplan

Traditional performance reviews, much like yearly medical exams, can be anxiety-inducing. While they are valuable, annual performance reviews are increasingly being phased out. In Singapore, over 17% of companies are eliminating annual reviews and rankings altogether. This is a worldwide phenomenon with over 10% of Fortune 500 companies and 12% of Fortune 100 in the US eliminating these annual occurrences, including prominent companies like Microsoft, GE, Accenture, Gap, Adobe and Deloitte. This is a huge jump from 2011, where the number was just one percent.

Evidence has shown that performance reviews negatively impact employee productivity and satisfaction because it threatens their status, which in turn restricts creativity while elevating stress.

Furthermore, they are not an accurate tool for evaluation. A study from leadership advisory firm CEB found that that two-thirds of employees who receive the highest scores in a typical performance management system are not actually the organization’s highest performers. This means that people who deserve recognition may not be getting it, while employees who may not be great performers, but have other qualities, like charisma, are unduly rewarded.

Despite these issues, feedback is vital to promoting employee engagement and growth, so long as it is data-driven and delivered in real-time.

Banishing biases from review process

Annual performance reviews can be a biased and flawed system. They create a situation where feedback gets stored up, so it is not delivered in the moment when it can have the greatest impact. By the time it is delivered, it can be irrelevant. As a result, employees lose out on valuable opportunities to learn and are saddled with uncertainty about their performance, which may prevent them from reaching their full potential.

Rather than relying on subjective feedback, employers should look at metrics around employee performance that provide more accurate insight into how they are doing. Metrics will vary depending on an employee’s role. For sales, it could be the number of deals closed and/or revenue brought in, whereas for customer support representatives, it might be queries answered and customer ratings on the quality of that support.

Not all positions can quantify success as easily as, for example, designers or writers. This is where metrics like quality of work and efficiency come in. The real question is to what extent are employees meeting their goals? Is their work achieving what it’s supposed to achieve? Answering these questions requires leaders to clearly communicate expectations and benchmarks in advance.

In addition, intangible factors should also play a role in performance reviews. If an employee is known for their helpfulness and initiative, but does not, for example, check-in as much code as a peer, they should not necessarily be criticized for that effort. Rather, the manager or team leader should weigh and best position the employee to take advantage of her strengths in future projects.

Harnessing the Data Surge

Outlining metrics, collecting data, and using that data as the foundation for discussions about performance help keep performance reviews fair. The focus on facts anchors the discussion so employees don’t feel overlooked or misunderstood. To further remove bias, companies can also institute “Rate the Rater” policies, where a manager’s evaluation ratings are normalised if they are found to historically be outside a selected variance relative to their peers. This helps level the playing field if one manager is either notoriously tough or lenient.

Another important step towards keeping performance reviews fair is consistent, ongoing feedback. By delivering feedback in-the-moment, leaders can recognize and reinforce positive behaviours, deter negative ones, and help employees grow. These conversations, too, provide a valuable baseline for discussion. They also prevent problems from stacking up, so formal performance reviews don’t feel like an ambush.

As millennials, with their desire for constant feedback, represent an increasingly large portion of the workforce, an organization’s capacity to provide meaningful performance reviews that help employees grow will be important for retention. Integrating data into the performance review process and breaking it out of the once-a-year model will make feedback delivery more fair, accurate and effective. Organisations have the opportunity to take performance reviews from a dreaded ordeal to one of the most positive aspects of their work experience. 

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