Why performance reviews do ‘more harm than good’

Annual (and semi-annual) performance evaluations can feel more like an interrogation than an open and honest coaching session. It’s not the style of feedback delivery most employees appreciate.

In fact, only 14% of employees surveyed by Gallup strongly believe the method motivates them to improve. Still, businesses are continuing to throw money into a system so flawed that it is actually doing “more harm than good,” analysts said.

An organisation with 10,000 workers, for instance, loses about US$2.4m to $35m in working hours just by forcing staff to undergo these annual reviews.

The traditional appraisal system where the employee’s good and bad points are revisited only after a year and workers are rated and ranked against each other isn’t just outdated – it’s also inefficient.

HRD spoke with three leading experts appearing at the 2019 National HR Summit about why the traditional system hinders growth.

“Appraisals have always had the element of one person judging another retrospectively rather than a more experienced, senior person guiding and developing another to become the best they can be and deliver improved outcomes for the business,” said Fiona Masson, Group Human Resources Manager at Lifewise NZ.

“Appraisals imply that performance is solely the responsibility of one person – the staff member, not a partnership between manager and staff member,” she said.

Masson believes in giving “in-the-moment” feedback in an environment “where the speed and pace of change, pivoting, and reprioritisation are constant”.

“People with a growth mind-set naturally seek feedback and often become sustainable high performers who can quickly respond to changing environments and challenges,” she said.

For Toby Cooper, Head of People Experience at Kiwibank, the old system is flawed because it focuses on “managing remuneration, not improving performance”.

As a result, the evaluation process is “slow, cumbersome, and costly, and [the conversations] provoke feelings of threat and disengagement in people”.

“Conventional ratings systems can inhibit collaboration and problem-solving, making a business less customer-focused and less able to respond quickly to changes, threats, and opportunities,” he said.

“There’s a move from annual or biannual reviews towards continuous coaching conversation and feedback and a forward-looking development focus (and the ability to develop skills quicker).”

A modern performance approach, he explained, is responsive to change, greater collaboration across and within teams, and the “desire for more simplified tools and a process that removes administrative complexity (with or without utilisation of technology)”.

After all, the role of the performance review essentially is to give the staff member the opportunity to understand how they are performing, what areas they need to develop and what areas they excel in, said Estelle Curd, Group CRM, HR and Health & Safety Manager at Armstrong Motor Group.

Curd has witnessed how Armstrong’s shift to quarterly “constructive catch-ups” has allowed for more productive conversations to take place between managers and employees. These catch-ups take only 10 to 20 minutes four times a year, instead of one hour twice a year.

“The basis of performance reviews has stayed the same (feedback); however, the way in which organisations deliver feedback is changing. I believe this is in part due to generational differences, improvements in technology and organisations reflecting on whether managers and employees are getting use from their performance review systems,” she said.

“What it comes down to is how well the manager can give real, open and honest feedback to their staff, no matter how difficult the discussion may be.”

Learn more about ‘Powering your performance management programs’ at the 2019 National HR Summit New Zealand on 20 August. Book tickets now