Over the last two decades, performance management has gone through a major revolution (for more details, you can check out our previous article on the history of performance management). But despite improvements to the system, employees still complain that performance reviews are biased. One survey found that only 29% of employees strongly agree that the performance reviews they receive are fair, and only 26% strongly agree that they are accurate.
There are many disadvantages to having (or having the perception of) ‘unfair’ performance reviews.
Disadvantages of unfair performance management
1) Employees could quit
85% of professionals would consider leaving their company over an unfair performance review. Even if an employee doesn’t leave the company, they may become withdrawn and disengaged, and disengaged employees can lead to lost productivity (see point #3).
2) Poor talent decisions
With poor assessment of an employee’s performance, making the right talent decisions and/or promotions becomes increasingly difficult. Moreover, poor human capital management can keep companies from reaching key financial targets.
3) Employee engagement and morale will drop
Only 14% of employees strongly agree that the performance reviews they receive inspire them to improve. One study found that only 34% of American workers are engaged. The cost of poor management and lost productivity from employees in the U.S. who are not engaged or actively disengaged is estimated to cost between $960 billion and $1.2 trillion per year.
4) Waste of time and resources
A CEB study found managers spend an average of 210 hours a year compiling and delivering performance reviews. This study also found that 9 in 10 managers are dissatisfied with how their companies conduct annual performance reviews, and almost 9 in 10 HR leaders say the process doesn’t yield accurate information.
5) Biases become prevalent
Of course, many managers do not want to be biased, but traditional performance management can increase the prevalence for common workplace biases (check out our article on the most common workplace biases for more details). Biased reviews will affect company culture and have employees running for the door – no one wants to be part of an unfair system.
So how can we have more fair performance reviews? We list some tactical steps below.
Having more equitable performance conversations
1) Sufficient quantity and quality of feedback (AKA performance data points)
As much as we try to be objective, everybody is biased. However, having multiple feedback data points from different people (peers, managers, direct reports) can help balance out once-a-year reviews. Once-a-year appraisal by one manager (ONE performance data point) is simply not enough. If the manager is able to have bi-monthly feedback conversations with the employee, that’s 24 data points. Self and 360 evaluations can further bolster an employee’s performance review and give even more insight into strengths and areas of development of an employee. Not only can more data help minimize biases, it also allows organizations to make better training and talent decisions.
Quality of feedback is also important. 24 “good jobs” or “kudos” isn’t going to help make performance conversations equitable. Providing sufficient detail and context is critical to help eliminate biases and make the feedback more tangible to the employees. Feedback should be action-based, behaviour based, and forward looking.
Did you know that managers account for at least 70% of variance in employee engagement scores across business units? Educating them on how to give effective feedback is critical to having equitable performance management.
Moreover, these conversations have to be a two-way conversation. Managers should always explain the context of any given feedback (it helps when examples are given) and why they choose a rating (if applicable), and they must always ask their direct reports questions to encourage a dialogue. On the flip side, employees should be comfortable enough to ask the manager (or giver of feedback) why they received a particular feedback. Two-way conversations help create a culture of feedback in the organization.
2) Be clear on performance ratings and compensation
Sometimes performance ratings can be the source of “unfairness”. Ratings must be clearly communicated to employees. Moreover, ratings must be accompanied by sufficient quantity and quality of feedback. A 3/5 won’t create a high-performer as the employee does not know which behaviours to repeat and correct.
3) Align and adapt goals
According to a recent survey, about half of employees don’t know what is expected of them at work. It’s hard for employees to meet performance goals when they don’t know what’s expected of them. Aligning employee’s goals to team and organization objectives, tracking goals, and adapting goals as needed can help employees take ownership of their tasks and help achieve their objectives.
4) Train your managers
Developing your mid-level managers is key. They are the ones that are giving feedback to the bottom line. And yet, only 10% of middle managers feel well-prepared for the managerial challenges they face. There should be a formal onboarding program to facilitate their transition to a new leadership role. Effective practices include (i) developing a 100 day plan for new middle managers, (ii) providing continuous feedback and (iii) creating clear performance management goals for middle managers as needed.
What can employees do if they think their performance review has been unfair?
This is tricky and will depend on the culture of an organization. If company culture has not embraced a feedback culture, an employee will feel awkward giving feedback to peers and/or managers. Employees can always turn to their HR department for help on how to approach their manager.
Self and 360 evaluations can become critical in these situations – they offer alternative perspectives on an employee’s performance. If there are gross differences in an employee’s performance evaluation (whether it be differences between peer vs manager, self vs manager, etc), HR professionals should always strive to find and resolve the issue.
Have any thoughts or tips on creating a more equitable performance management process? Let us know!