Performance reviews are widely used in organizations, yet are implemented inconsistently and are often controversial: Do they work? What’s the best way to implement them? Don’t unfair grudges or favoritism, or other forms of bias, fatally compromise them? I’ll begin to share with you a few thoughts on each of these questions in this first of a multi-part blog entry on performance reviews.
Why should my organization bother with performance reviews?
Both research and experience show that organizations tend to succeed in what they measure. Written performance reviews, when implemented correctly, go a long way toward measuring and improving employee performance. Employee resources can also be allocated more effectively throughout the organization based on employee-talent information captured in the review.
But there’s a huge organizational benefit beyond that. Performance reviews can play a crucial role in communicating organizational goals, and engaging employees at all levels in the right tasks that will help the organization reach those goals. I’ve personally seen the tangible benefits in terms of both improved productivity and engagement in an organization once a well-thought-out performance review process has been implemented.
We give reviews only to facilitate promoting or firing someone; is this enough?
Your organization will get the most out of a performance review process when reviews are applied consistently (at regular, pre-set intervals that are the same throughout the organization) and comprehensively (i.e. to everyone, from an entry level clerk to ideally even the CEO!).
Ensuring that everyone is reviewed at regular intervals is a key factor in focusing all managers on both organizational goals and the importance of talent management. Having reviews applied in such a uniform way also helps to reduce both the perception and reality of bias in the review.
What should the performance review measure?
Performance reviews need to measure both the attainment of specific objectives (i.e. the what) and how these objectives were achieved. The “how” is important if you want to ensure that individual goals aren’t being achieved at the expense of larger organizational objectives.
Case in point: I worked with an organization where a recently hired executive excelled at achieving short term objectives. A year after being hired, business unit revenues were up and costs were down. It became apparent, however, that this person was in the process alienating colleagues, duplicating the effort of other departments, and causing a retention problem for productive employees! After a while those initial, stellar results became quite tarnished. Unfortunately the organization did not yet have a review process in place to deal with this situation, and things were allowed to fester far too long.
So your organization doesn’t make this same mistake and nips these problem situations in the bud, emphasize how objectives are attained: make it count for ½ the review. An organization’s “leadership competencies” (behaviors that an organization values) are often used as a guide to measuring this part of performance.
A consistent, comprehensive review process also helps to ensure employee engagement around organizational objectives. If each employee’s performance review objectives roll up to her or his manager’s objectives, all the way up to the CEO, then the tasks employees are prioritizing will all be supporting the firm’s larger goals. The bottom line: implement your performance review system so that the objectives a review measures fit together laterally across the organization (like pieces of a puzzle) and vertically (like layers in a pyramid).
In a subsequent Blog entry, I’ll cover the steps managers should take to conduct and score a review (hint: the process starts 12 months prior to the review), and also discuss how to reduce potential bias in the review process.