For as long as I can remember, the debate about the worth of Performance reviews and appraisals has been around.   Peter Cappelli and Anna Tavis in their book The Performance Management Revolution set out the circular nature of the history of performance management, back in 2016.  I’m not sure much has progressed since then.  It’s about time that we move on from performance reviews and think about what can be done instead.

Capelli and Tavis concluded three drivers for change: The need for,

While these are fundamental pillars of how performance reviews should be focused, there are some wider considerations.

The History of Performance Reviews and Appraisals

Dating back to the 20th century, performance reviews, also known as performance appraisals, have a long-standing history. The Industrial Revolution marked the beginning of the concept of performance reviews. As factory work rose, employers found a need to evaluate their workers’ performance. During World War I, the U.S. military took the lead in implementing a formal appraisal system to identify and discharge or transfer poor performers.

Fast forward to the 1950s and 1960s, performance reviews gained more traction in the corporate world. Corporations viewed them as a tool for motivating employees, identifying promotion potential, and determining compensation. However, the process often leaned towards subjectivity, focusing largely on traits and characteristics.

Transitioning into the 1980s and 1990s, performance reviews underwent a shift in focus from traits to objectives and results. Peter Drucker popularised the Management by Objectives (MBO) approach, which involved setting specific, measurable goals for employees and evaluating their performance based on the achievement of these goals.

By the early 2000s, many companies started questioning the effectiveness of traditional performance reviews. Critics pointed out that annual reviews were too infrequent, overly focused on past performance, and demotivating for employees. Consequently, some companies began experimenting with more continuous, feedback-oriented approaches in response.

In today’s corporate landscape, a growing trend is emerging towards abandoning traditional performance reviews in favour of more frequent, real-time feedback. Many companies now place a greater emphasis on development and future potential, rather than just past performance. Despite this shift, traditional performance reviews remain common in many organisations.

Importantly, the effectiveness of performance reviews can greatly vary based on their implementation. A well-designed and well-executed performance review process can yield valuable insights and drive performance improvement. Conversely, a poorly designed or poorly executed process can demotivate employees and foster a culture of fear and competition.

Commonly Used Models For Performance Reviews

1. 360-Degree Feedback

Collecting feedback from all individuals who work closely with the employee, including peers, subordinates, supervisors, and sometimes even customers. The goal is to provide a holistic view of the employee’s performance.

2. Management by Objectives (MBO)

Managers and employees work together to set, review, and track objectives. The performance review is based on whether these objectives were met.

3. Rating Scale

Uses a numerical or letter grading system to evaluate employee performance on various factors such as teamwork, communication, professionalism, and job knowledge.

4. Checklist

Involves a list of statements or questions that managers check off based on the employee’s performance. The checklist can be weighted or unweighted.

5. Critical Incidents

Focuses on key behaviours that made a difference in terms of the job being done. These could be both positive and negative incidents.

6. Narrative or Essay Evaluation

The manager writes a detailed narrative describing the employee’s performance. This can provide a lot of specific feedback but can also be time-consuming.

7. Self-Evaluation

Involves the employees in evaluating their performance. This can be used as a standalone model or combined with other models to provide a more comprehensive view.

8. Assessment Centre Method

It involves a series of tests, simulations, and exercises designed to evaluate the skills and potential of employees. This is often used for leadership assessments or when considering employees for promotions.

9. Behaviourally Anchored Rating Scales (BARS)

Combines narratives of various levels of performance with a rating scale. The narratives provide a context for the rating, making the evaluation more accurate and meaningful.

10. Competency-Based Reviews

Focuses on the skills and abilities that are key to the role and the organisation’s values. The review assesses how well the employee has demonstrated these competencies.

Each of these models has its strengths and weaknesses, and the choice of model depends on the nature of the job, the culture of the organisation, and the specific objectives of the performance review process.

Why Performance Reviews Don’t Work

Performance reviews and appraisals often fail to provide accurate and constructive feedback. They can be biased, subjective, and based on outdated metrics that don’t reflect the current needs of the business or the individual’s role. Moreover, they can create a culture of fear and competition, rather than collaboration and growth.  Some organisations make great efforts to make their system work.  This can minimise issues.  However, there are many ways the credibility of the system can be compromised.  This can create a lack of trust and investment in a review system.  The following suggested pitfalls are not exhaustive but give a flavour.

1. Bias

Performance reviews are often subject to various biases. For example, managers may give more favourable reviews to employees they like or have more in common with, a bias known as the “similar-to-me” bias. They may also be influenced by recent events or standout achievements or mistakes, a phenomenon known as the “recency” and “halo/horn” effects.

2. Lack of Frequency

Traditional performance reviews typically occur annually or semi-annually, which may not provide timely feedback to employees. This can make it difficult for employees to correct their course or build on their successes promptly.

3. Focus on Weaknesses

Performance reviews often focus on identifying and correcting weaknesses, rather than building on strengths. This can be demotivating for employees and may not lead to the desired improvements.

4. Lack of Constructive Feedback

Reviews often fail to provide constructive, actionable feedback that employees can use to improve their performance. They may focus on vague traits or behaviours, rather than specific actions or results.

5. Ineffective Goal-Setting

Goals set during performance reviews may not always be SMART (Specific, Measurable, Achievable, Relevant, or Time-bound). This can make it difficult for employees to understand what’s expected of them or how to achieve their goals.

6. Fear and Stress

Performance reviews can create a culture of fear and stress, which can hinder performance rather than improve it. Employees may fear negative feedback or consequences, and this fear can overshadow the potential benefits of the review process.

7. Lack of Training

Managers often receive little training on how to conduct effective performance reviews. This can lead to inconsistent, ineffective reviews that don’t provide value to the employee or the organisation.

8. One-Size-Fits-All Approach

Traditional performance reviews often use a one-size-fits-all approach, which may not reflect the unique roles, responsibilities, and challenges of different employees.

The Neuroscience of Inspiring Instead of Reviewing Performance

Neuroscience suggests positive reinforcement and inspiration can be more effective than criticism in driving performance. When employees feel inspired, their brains release dopamine, a neurotransmitter associated with motivation and pleasure. This not only makes them feel good but also motivates them to repeat the behaviours that led to positive reinforcement.

Driving Up Performance By Inspiring Your Team

Inspiring your team involves creating a positive, supportive environment where employees feel valued and motivated to do their best. This can be achieved by recognising their achievements, providing opportunities for growth and development, and fostering a culture of collaboration and mutual respect.

10 Principles of Inspiring Performance

Clear Communication: Communicate your vision and expectations.
Recognition: Regularly acknowledge and appreciate your team’s efforts.
Empowerment: Give your team the autonomy to make decisions and solve problems.
Growth Opportunities: Provide opportunities for professional and personal growth.
Positive Work Environment: Foster a positive, supportive, and inclusive work environment.
Trust: Build trust by being transparent, reliable, and fair.
Feedback: Provide constructive, timely feedback to help your team improve.
Collaboration: Encourage teamwork and collaboration.
Work-Life Balance: Promote a healthy work-life balance to prevent burnout.
Leadership: Lead by example and inspire your team through your actions.

Implementing a system to inspire performance involves shifting from a focus on reviews and appraisals to a focus on continuous feedback and development. This could involve regular one-on-one check-ins, peer feedback, and coaching sessions. It also involves recognising and celebrating achievements, both big and small, and creating a culture where mistakes are seen as opportunities for learning and growth.

Ditching traditional performance reviews and appraisals and inspiring your team instead can lead to higher levels of engagement, productivity, and job satisfaction. It’s a win-win situation for both the individual and the organisation.

Creating A Culture Of Driving Up Performance

Performance reviews will stand or fail depending on ways of working for internal teams and employees.   Creating a healthy environment is key to getting good results and inspiring your team.   Here are 3 examples;

1. Fostering a Growth Mindset

A growth mindset, a concept coined by psychologist Carol Dweck, is the belief that abilities and intelligence can be developed through dedication and hard work. In the context of performance, fostering a growth mindset within your team can be a game-changer.

When employees believe they can improve and grow, they are more likely to embrace challenges, persist in the face of setbacks, and see effort as the pathway to mastery. This mindset creates a love for learning and resilience, essential for great accomplishments.

As a leader, you can foster a growth mindset by praising effort, strategies, and progress, not just outcomes. Encourage your team to view challenges as opportunities for growth, and mistakes as a natural part of the learning process.

2. Creating a No-Blame Culture

A no-blame culture is one where mistakes are not met with punishment, but rather viewed as opportunities for learning and improvement. This type of culture encourages open communication, creativity, and risk-taking, as employees do not fear retribution if they make a mistake.

To create a no-blame culture, leaders must model the behaviour they want to see. This means admitting their own mistakes, reframing errors as learning opportunities, and encouraging team members to do the same. It’s also important to focus on problem-solving rather than finger-pointing when things go wrong.

3. Encouraging Internal Customer Service

We define internal customer service as the service we extend to our colleagues and other departments within our organisation, distinguishing it from the service we provide to external customers. Enhancing internal customer service can lead to improved efficiency, productivity, and morale.

The first step to encouraging excellent internal customer service is to cultivate a culture of respect and cooperation. It’s crucial to remind your team that they are all working towards a common goal, and mutual assistance is a key component of achieving that goal.

Fostering open communication and collaboration among different departments is also essential. It’s important to motivate team members to promptly respond to their colleagues’ requests and take the initiative to offer help. Just as you would for excellent external customer service, recognising and rewarding exceptional internal customer service is vital.

By nurturing a growth mindset, establishing a no-blame culture, and promoting excellent internal customer service, you can inspire your team to excel. Simultaneously, you can cultivate a positive, supportive work environment.