Should We Even Do Performance Reviews Anymore?

Dear Peoplism,

We recently finished a round of performance reviews and it was, as usual, a stressful process. Managers were annoyed that they had to spend so much time filling reviews out. Many employees complained that they didn't know what to do with the feedback they received. Others complained that they got a great review but their manager still says they aren’t ready for a promotion and they don’t understand why.

I’ve read that some companies are getting rid of performance reviews completely and I’m about ready to join them. If everyone seems unhappy with them, what's the point? What do you think about getting rid of performance reviews?

Sincerely,
Needs Improvement



Dear Needs Improvement,

We understand your frustration, we really do. We hear all of these complaints and more when we survey and interview employees during our DEIB Assessments. And our review of the academic literature on performance reviews turned out to be much bleaker than we expected. This is an actual quote from an academic paper, not an op-ed:

“Performance appraisal can, unfortunately, be thought of as a well-developed, carefully instrumented system for making people unhappy.” (Murphy & Deckert 2013).

The bad news is that:

• Measuring job performance is prone to errors.
• In general, employees and managers don’t like performance review systems.
• There is little evidence that performance reviews improve individual or firm performance.

And, yet, we urge you not to get rid of your performance reviews. Because the only thing worse than having performance reviews is not having performance reviews! Getting rid of reviews doesn’t eliminate the need to make tough decisions that should be based on performance, like who should be promoted, or given a merit-based raise and how much.

Further, while simply having performance reviews doesn’t mean all employees are getting effective, actionable feedback (as your employees are justifiably pointing out), if you get rid of performance reviews it’s unlikely those complaints will go away. Instead, it’s likely that some employees will get no feedback at all. Research shows that women and people of color are less likely to receive constructive, actionable feedback from their managers. Performance reviews are a forcing mechanism for feedback, albeit a blunt one.

Can’t we just move to a “continuous feedback” system? Sure, in theory. But in practice, if your managers aren’t giving good feedback once or twice a year, there is really little reason to believe they will suddenly be giving great feedback year-round.

Performance reviews should focus on fairness
Done well, performance reviews can have really positive impacts on employees and organizations by promoting a greater sense of fairness. When ambitious employees feel their workplace is unfair, they leave. The Kapor Center’s Tech Leavers study found that "Tech employees from all backgrounds cited unfairness more than any other factor as a key driver of their decision to leave." Why work so hard if you don’t believe your efforts will be rewarded?

On the flip side, McKinsey & LeanIn's Women in the Workplace study found that when employees think the system is fair “they are happier with their career, plan to stay at their company longer, and are more likely to recommend it as a great place to work.” Across a number of studies, fairness emerges as a stronger predictor of employee satisfaction and retention than pay, leadership accountability, and manager support.

Performance reviews are an opportunity to show employees that your organization cares about fairness. But that can only happen if reviews are actually fair, instead of full of the typical empty comment boxes. Fairness means that employees know what they will be evaluated on ahead of time, managers are trained to mitigate bias and apply standards evenly, and managers give equally effective feedback to all their reports.

Instead of getting rid of performance reviews, improve them by focusing on fairness. We’ve worked with many of our clients to improve their performance management system from an equity lens, and we’ve compiled our process into a step-by-step guide to help you get started. Click here to access the full guide.

Good luck!
The Peoplism Team