Employee Performance Reviews: Changes & Challenges
Posted By: Daniela Tancau
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Employee Performance Reviews: Changes & Challenges
Why do companies need employee performance reviews?
Employee performance must be evaluated because a company’s success depends on how well its members perform in their roles. A well-built and properly conducted performance evaluation system provides objective grounds for decisions such as task assignments, promotions, and salary raises.
Performance reviews also provide information on employees’ strengths and the skills they need to improve and develop. They help identify the type of training and coaching employees need. They offer an opportunity to uncover challenges employees face, the factors that contribute to their success, and the reasons for any shortcomings.
Additionally, employee performance reviews give insights on what is working well within a company and what isn’t. They show what need to be preserved, as well as areas that require change – it could be poor hiring criteria and decisions, poor work processes, or a lack of leadership skills that negatively impact employee behaviour and engagement.
What is the main goal of performance evaluation?
Performance review systems have the primary goal to improve employees’ performance. They were created to assess the degree to which employees meet the company’s expectations, provide feedback, and take action based on them.
At the core, feedback on how the employee is doing in his/her job is used as a tool to increase work results.
How employee performance is assessed, how feedback is given, and what actions are taken after the review vary across companies.
How Do We Know if a Performance Review System is Well-Designed?
A well-designed employee performance review system will achieve its main goal and increase employees’ performance, while a deficient system will fail to do so.
Besides this, the people who make the assessments and provide feedback play a key role in the success of a performance review system. Even if the system is good, if the people who apply it are not accurate in their assessments, if the feedback is given in the wrong way, or if the actions taken are not appropriate, the goal of the reviews will not be attained. Consequently, the company will have losses.
There are many working hours and a significant amount of money spent in preparing and conducting the assessments, documenting them, and in the discussions and actions taken as the result of them.
For example, according to a Harvard Business Review article from 2016, a Deloitte manager affirmed that the company invested 1.8 millions hours in a traditional annual performance review system that didn’t fit the business needs anymore.
Therefore, the established method through which employees’ performance is assessed has to be effective, and equally important, the people who use the tool created for this purpose have to use it well.
How Employee Performance Reviews Should Be Done
How do you evaluate your employees’ performance?
Are you satisfied with your employee performance review process? Do you intend to make changes?
And do you know if your employees are satisfied with how their performance is evaluated?
I don’t think there’s one single right answer to ”How should employee performance reviews be done?”, but I do believe that we can all learn from the past, from what worked and what failed, and from what has become inefficient because of external changes. What works best now may become outdated after 10 years or so.
What Does Research Data Show?
A CEB (Corporate Executive Board) survey of 13,000 employees worldwide, from 2015, revealed that in regards to traditional annual evaluation process that involves ratings :
– 66 % of employees were dissatisfied with the performance evaluations they received
– 65 % said it isn’t even relevant to their jobs
– 95 % of managers said they aren’t satisfied with their organizations’ performance management processes
– 90 % of HR professionals don’t believe their companies’ performance reviews provide accurate information
A study made by Zippia shows that:
– only 49% of companies from U.S. are using annual performance reviews in 2023 (2016 – 82%, 2017 – 65%, 2018-58%, 2019-54%)
– 55% of workers don’t believe annual review improve their performance
– 77% of HR leaders say annual reviews are not an accurate representation of employees’ work
-80% of workers prefer immediate feedback over annual performance reviews
– Companies with continuous performance reviews outperform their competition by 24%
Why Annual Employee Performance Reviews Tend to be Replaced
Let’s see some of the limitations of annual employee performance reviews that make them less efficient and therefore replaced with other performance reviews methods.
Feedback is given long after the actions and behaviours that are assessed
When feedback for an action or behaviour is given, for example, six months after it happened, there is often nothing to do about that action or behaviour anymore. Too much time it passed.
For example, if a manager tells one of his team members, John, that he is unsatisfied by how he worked with another colleague a few months ago, John may not even remember all the details of that situation. He may not remember what he said to the other person, why he acted that way, or the context of that situation. He can’t go back in time and change what happened.
The feedback would have been helpful right at that moment. After the situation would had been carefully analysed, if John actually did something wrong, he should have been asked to adjust his behaviour then. This could prevented the risk of unwanted behaviour from happening again and create discontent to other colleagues.
And in the case John actually didn’t do anything wrong, he can’t defend himself now because there’s no time to discuss that situation, he is not prepared for it, and he may not remember all the details at this moment. So, not only he is unfairly blamed, but now he is sanctioned because of a misunderstood situation that was not addressed properly at the right time.
It's difficult to have a complete picture of an employee's work over a year
Some of the employee’s achievements or failures may be missed or forgotten. Managers should make a detailed record of an employee’s activities and behaviours. Also, a lot of the contextual data that lead to certain actions or decisions may be forgotten or missed by both the employee and the manager. This makes it difficult to conduct an accurate assessment.
Even if all the activities are recorded in detailed reports, it’s difficult to go through all of the documents and have an accurate picture of what happened.
This could lead to biases such as:
Recency Bias
Managers might focus disproportionately on recent events rather than evaluating the entire year. This can skew assessments, favoring or penalizing employees based on what happened close to the review period.
Overgeneralization
Trying to summarize a year’s performance in one meeting or report can lead to oversimplified conclusions, missing nuances and specific contributions.
There is little time for the manager to address in depth all the issues they find in an employee's work
The manager doesn’t have enough time to discuss all the aspects of an employee’s performance. Also, there is little or no time for guidance and coaching. Some managers may not even intend to do this, aiming only to hold employees accountable for what they did and what they didn’t do.
If the employee is not given alternatives and support to overcome the obstacles they face, their performance may not improve.
Employees may be uncertain whether they are meeting the company's expectations
If the employees don’t receive feedback about their work they might not know for sure if the company appreciates or not their work. The employees don’t know for sure what to change and what to keep doing in their work. So these employees performance can’t improve.
Without frequent feedback, employees may make wrong assumptions about their work, which will impact how they use and direct their efforts.
- It’s possible that without feedback, employees might assume their performance is adequate even if it’s not.
- Some may think their efforts go unnoticed or are not valued. So, if it’s not valued, why should they keep given their best efforts.
Different companies may have different work standards and different performance standards. What is appreciated in one company may not be good enough in another one. Providing continuous feedback help the employees know where they are in rapport to these and stay on track.
Lack of frequent feedback may affect trust between the employee and the manager
Lack of feedback can reduce trust between the employee and the manager. It implies a lack of transparency and poor communication. It may be seen as the manager doesn’t want to help the employee in any way, just wants to observe what he/she is doing and then, when the evaluation comes, reveal what they really think about the employee’s work.
Managers’ role are not to be passive observer, but to support their team members in their work, if there is a need for that, set clear expectations, and intervene whenever they are going in the wrong direction.
Ineffectiveness for goal settings
Annual reviews often set broad, long-term goals, which may not adapt well to changes in priorities or market conditions throughout the year. There could be external changes that require different actions and directions for the business and, therefore, from the employees.
Annual goals may fall in the background due to day-to-day priorities or because these are not properly managed.
If they are not broken down in small steps and scheduled throughout the year – which can’t be done during the time reserved for the performance review – and if there are not regular check-ins to track the employee progress, there is a high chance that these goals will not to be attained.
Anxiety and Stress
Annual employee performance reviews are often accompanied by stress on both sides, for the employee and the person who makes the assessment. The employee may fear being criticized or not obtaining the scores that they want. On the other side, the person who makes the assessment may feel uncomfortable discussing the things that were not appreciated or handling unexpected or negative reactions.
If employees think that they are not accurately assessed or when the feedback is not delivered in a professional way, they may have different reactions. Their motivation may drop, they may leave the company, they may have negative attitudes towards management and the company, and their trust may erode.
In one of my last blog posts, I mentioned the example of Adobe, which replaced traditional annual employee performance reviews because of their inefficiency and demoralization of everyone involved. They observed regular increases in employee departures right after the reviews were made. You can read more about this here.
Learn how to improve your employees’ motivation with the help of the Online Program:
How To Motivate Your Employees So They Care For Your Business And Help You Grow It
You’ll get access to recorded sessions that will guide you through all the steps necessary to implement the program in your company, plus 1:1 coaching sessions.
Providing Feedback Is Not Enough To Increase Employee Performance
You can’t improve an employee’ performance without identifying the things that cause him/her to be at a specific level, and what would increase that employee performance.
There could be various reasons for poor performance. For example:
Lack of skills and competencies for the tasks and responsibilities that the employees have, or for some of them. Furthermore, this situation could have been created by a poor hiring decision, or by assigning tasks that are above the employee’s capabilities without providing any support.
Unclear roles and expectations. For example, if the manager assigns a project to two people without specifying or establishing together with them how each will contribute to the project, they may use the time inefficiently. Without each person taking care of specific parts of the project, they may end up doing all the tasks together, wasting precious time, or arguing over who will do what, stepping on each other’s toes.
Lack of feedback can be a cause in itself. As specified before, because the employee doesn’t know what he/she is doing right and what needs to be improved, they may perpetuate the wrong actions or behaviours. Also, they may lower their efforts because they might thing these are not seen or appreciated.
Toxic or unhealthy relationships with the manager or co-workers. So the solution here is to improve these relationships. Especially if the employee has to work with a colleague with whom his is not getting along, his performance will be affected by this. Measures have to be taken to improve the relationship between these two employees, helping them to solve their disagreements, or, if possible, pair them with other colleagues.
Work overload. Too many tasks assigned to one employee can overwhelm them and lead to poor results, even in tasks they are very skilled at. Lack of time and stress can lead to a poor-quality work.
Perception of unfair treatments. As mentioned before, in the example with John, unfair treatment will lower the employee’s motivation, impacting their engagement.
Inadequate leadership. For example, providing too little support to employees who not developed the necessary skills, or being too directive with experienced employees who are capable to handle things on their own. In both cases, employee motivation will decrease, leading to poor results.
Regular Feedback And Focus on Development
A lot of the limitations of annual employee performance reviews will be eliminated if these are replaced with regular feedback and a focus on the main goal of performance review, which is improving performance. Annual performance reviews focus more on accountability rather on improvement. Employees should be held accountable for their results, but at the same time, they need support to improve their performance.
Regular feedback allows addressing performance issues in real-time and discussing them in more detail. It creates space for the employee to give feedback too, sharing their perspectives on the issues as well. This will lead to more accurate perspectives on issues and challenges encountered, and thus to more suitable solutions.
Regular feedback reduces biases like generalizations and assessing based on the most recent activities. It reduces the stress of those involved, creates clarity on what is expected, and on the obstacles that could create setbacks.
Some examples of companies that replaced their annual employee performance reviews are:
- Adobe – It replaced it with a system of regular check-ins, which allows managers and employees to discuss performance and career growth, and exchange real-time feedback. You can read more about this on their website here
- Microsoft – Its performance management system consists of a series of ”Connects” – meetings with the manager – and support collaborations between employees – according to interviews conducted by Business Insider with company members. The traditional system, where employees were compared with one another through scores encouraged competition.
Conclusion
A well-designed employee performance system can imply major changes in your company, but if you consider all the advantages that will come with this, there’s no doubt that you can’t afford not to have it. How employees’ performances are assessed impacts their engagement and motivation, their work results, their retention, and their levels of satisfaction with their jobs and with the company.
Key Points
Why do companies need employee performance reviews?
What is the main goal of performance evaluation?
How do we know if a performance review system is well-designed?
How employee performance reviews should be done. What does research data show?
Why annual employee performance reviews tend to be replaced. Limitations of annual employee performance reviews.
Providing feedback is not enough to increase employee performance
Regular feedback and focus on development
Online Employee Motivation Program
You can choose between two types of programs: Done for You AND Done by You
Done for You
Improve Work will implement the EMPLOYEE MOTIVATION PROGRAM in your company.
As part of this process, we will conduct interviews with your employees to assess their motivational levels and key drivers. In addition, we will hold meetings with management to ensure that the personalized and general motivational strategies proposed are aligned with the company’s goals and resources.
Done by You
Learn how to improve your employees’ motivation with the help of the online program:
How To Motivate Your Employees So They Care For Your Business And Help You Grow It
You’ll get access to recorded sessions that will guide you through all the steps necessary to implement the program in your company, plus 1:1 coaching sessions.
Posted By: Daniela Tancau
Daniela Tancau is an HR consultant, trainer, coach, and founder of Improve Work company. She has over seventeen years of experience in the human resources field. Her expertise lies primarily in online programs and courses aimed to increase employee motivation, develop team leadership skills, employee communication, and much more.
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