5 Mistakes that Will Ruin Your Performance Reviews
A big part of running a successful company is pushing your employees to give their best. Simply telling them to do well is meaningless if you don’t give regular feedback on how to do that and track performance. That’s why the performance review process is so important.
Properly engineered, performance reviews can help companies foster a culture of continuous improvement. They also help alleviate tension from some of HR’s biggest challenges.According to Bersin by Deloitte, these are:
- Retention, engagement, and culture
- The need to build a leadership pipeline
- The need to improve employee learning
But the fact is, a lot of companies are terrible at reviews. They invest minimal effort, and employees come away with, at best, a vague notion that they need to “do better”. . . casually forgotten a week later.
A 2013 report by I4CP found that only 55 percent of HR professionals think their performance management process has a “positive business impact.” If you want your business to be in this relatively small group, you need to avoid costly, but common mistakes that can ruin your performance reviews.
Start with these five:
- The Annual Review
There’s nothing wrong with annual reviews in and of themselves, but if you only evaluate employee performance once a year, you probably aren’t providing enough reinforcement and oversight to influence real change. Research shows that companies where employees review their goals at least quarterly are 45 percent more likely to have above-average financial performance.
How often you hold formal review meetings is up to you, but every employee should be aware of their goals and be able to account for progress throughout the year. Try to test out different intervals (every quarter, every six months, etc.) and see which yields the best results.
- Tying Reviews to Compensation
It’s traditional to link performance reviews with compensation. Research from Mercer consulting indicates that 94 percent of organizations still conduct a formal year-end review and that 89 percent link individual review ratings to decisions about compensation. I.e., an employee’s raise or lack thereof is determined by their performance leading up to and discussed during the review meeting.
You should, of course, reward stellar performance and de-incentivize apathy, but muddling the performance review with a salary discussion can skew the whole thing. Instead of focusing on quality of work and professional development, employees try to sweet-talk managers into a raise (which means they don’t evaluate themselves with honesty). If you incorporate peer reviews into the process, colleagues may feel a similar obligation to beautify comments or gloss over weaknesses to avoid coming between their co-worker and a raise.
The best way to get honest feedback is to make it clear that, while job performance does affect compensation, the performance review itself is not directly connected to compensation decisions.
- Fixating on the Past
Sometimes a performance review devolves into a laundry list of things an employee has done right or wrong over the last six months. It’s good to reflect on lessons learned and discuss successes/failures, but don’t stop there. Be retrospective and forward-thinking. Challenge your employees to pursue specific goals in the future and give them opportunities to grow.
For example: ask about an area where they’d like to be stronger, and figure out how you can support their development. Paying for an online course? Sending them to a conference? Assigning a mentor?
Ultimately, this approach will be to your mutual benefit; it helps cultivate ambition among employees, but it also gives you a running skills inventory for succession planning. Companies that assign learning objectives based on performance reviews will see higher employee engagement and have an easier time filling open positions.
- Working from Paper and Spreadsheets
If you don’t have a centralized system in place for managing reviews, you’re going to lose track. No way around it. You’ll either confuse and skew employee data in a flurry of spreadsheets and emails, or you’ll simply forget who’s pursuing which goals and why. Some 58 percent of HR professionals still use spreadsheets to track performance metrics.
Just like other administrative HR tasks, your best bet is to track and manage performance reviews using your HR software solution. Automated, digital performance management lets you collect individual and peer reviews, track ratings, goals, and progress, and assign unique objectives to each employee profile. Centralized management makes the whole process much more effective.
If your main HRIS doesn’t provide built-in performance management, look for a third-party app that meets your needs and integrates with your existing system. A talent management or custom survey tool will do the trick.
- One-Source Feedback
The conversation should never flow in one direction during a review — whether that means a manager monologue or an employee monologue. Either way, a single, biased perspective isn’t enough to accurately gauge performance.
At the bare minimum, the manager and employee should both give an opinion and ratings for key performance areas. But ideally (if you have the resources and time) you’ll also collect reviews from co-workers.
For example, if the employee is an outbound sales rep, you could assign one review to their team leader, one to the sales coach, and one to a fellow outbound rep (in addition to an employee self-assessment). In the industry, most refer to these as “360-degree” performance reviews.
A successful performance review strategy is about getting feedback from the right parties, using that feedback to look forward and backward, and keeping up with performance trends over time. Beyond avoiding pitfalls, it’s important to see the bigger picture. Performance reviews aren’t an end in themselves (or at least shouldn’t be). They’re part of the larger performance management and succession planning framework that should be carefully designed to propel not just employee achievement, but also business growth.
Aleksandr Peterson is a technology analyst at TechnologyAdvice. He covers marketing automation, CRMs, project management, human resources, and other emerging business technology. Connect with him on LinkedIn.