How to Create a Truly Effective Performance Review Process

How to Create a Truly Effective Performance Review Process

Let’s admit it: the traditional methods for performance reviews are outdated.

But they’re not going anywhere any time soon. According to Globoforce, a whopping 91% of organizations use them. And they’re mostly just doing them to check it off their to-do list.

Everyone Hates Them

Can you honestly admit that you enjoy writing these appraisals? If you don’t, imagine how your employees feel when they read their review.

Why Managers Hate Them

Managers don’t want to be labeled the “bad guy” when they dish out negative feedback. Not to mention, they try to consolidate an entire year into one 30-minute review. And don’t even get us started on how time-consuming they are.

Why Employees Hate Them

Globoforce found that 51% of employees see their reviews as inaccurate. They’re right. With a 6- or 12-month lag between each cycle, they’re untimely and irrelevant. Managers tend to focus too much on the negative and don’t provide valuable information.

So from the looks of it, it’s a mutual dislike. Managers struggle with coming up with the content, and employees feel like they’re inaccurate. So isn’t it about time this is fixed?

The Four Performance Review Questions to Avoid

Nowadays managers are turning to 360 reviews in hopes of eliciting more insightful answers from their employees. But do they really help when 45% of workers feel these reviews are a waste of time?

What’s killing this so-called tried-and-true practice? And the answer is this: the questions. Here are the four questions that are ruining employees' reviews.

1. What were my key accomplishments?

  • Goal: Find out what this employee did well during the past year.
  • Why if fails: Reviews typically have an annual or semiannual cycle. But many things happen in six months, so it’s difficult to think back that far or even as far as two months ago.

2. What didn’t get done or what should have been done differently?

  • Goal: Find out what this employee can improve on.
  • Why it fails: Since these reviews are typically tied to compensation, you can bet employees are going to be hesitant about dishing up their failures. So trust that employees are going to misunderstand this question and not tell the truth about their performance.

3. Think about and review the competencies for your role and our company’s values.

  • Goal: Find out how this employee integrates the organization’s values into their daily activities.
  • Why it fails: It’s complicated. When you phrase questions in a highbrow or ambiguous manner, employees aren’t going to understand what you’re looking for. And when employees aren’t given a clear direction, you’re also not going to receive a clear answer.

4. What are your strengths? Which ones do you demonstrate regularly?

  • Goal: Find out which areas this employee excels in.
  • Why it fails: It’s vague. The question doesn’t ask for specifically how an employee’s strengths contribute to success in their role. Essentially, employees can, again, misunderstand this question and think they can list off anything they’re good at — related to work or not.

"Employee reviews weren’t meant to be useless. But the practices managers are using are making them fail. "

Create reviews that benefit both parties by keeping them relevant, asking what employees want, and being specific with what you’re trying to get out of each question.

The Five Review Methods to Avoid

You might not even realize you’re making mistakes when you're doing these appraisals. Here are five methods you might be using but need to avoid when doing reviews:

1. The Sandwich Approach

A very common mistake, this method involves starting off feedback with praise, dishing out the negative news, then sugarcoating it with more praise. Something similar to “We value your work, but you’re not meeting the production level. However, you’re a valuable employee to us.” And we get it — you don’t want to be the bad guy. But dishing out the news this way only makes you sound insincere. So just give employees the bad news without the fluff. Feedback is meant to help your employee improve their performance.

2. The Recency Effect

“What has this person done lately?” This is a question that managers ask themselves, and the answer is the result of a recency effect — a psychological theory that involves using recent events to analyze past performance. When review cycles have a 12-month lag, it’s easy for managers to focus on what’s fresh in their minds. But this brushes aside any positive or negative behavior that has gone unaddressed.

3. The Horns And Halo Effect

A Princeton study had participants rate a man in suit with a Cornell degree versus a man in casual clothing with a nondescript college degree. The participants rated the suited man as more competent than his casual counterpart. And that's the Horns and Halo Effect — managers assume that an employee is naturally good or bad at their job. This can be prevented by basing performance reviews on data instead of opinion. How many sales has this person closed in one month? How many clients have they lost in two months? Doing this deters any opinion from obstructing the actual review.

4. "Like Me" Bias

The U.S. Equal Employment Opportunity Commission released a study and found that people prefer to associate with others that are like themselves. This mentality can stem from something as serious as racial prejudices to disliking how an employee styles their hair. But in the end, it has the same result: managers believe that people who aren't similar to them can't perform their jobs well.

5. Central Tendency Error

The last method to avoid is one that involves team evaluation. If a manager rates a group of people as average performers, then they're more likely to evaluate individual employees as average as well. The flaw in this method is that underperformers are getting overvalued, and overachievers are getting undervalued. A great boss needs to customize each individual review. Yes, it might take a long time. But individual reviews are critical if you're looking to truly evaluate an employee's performance.

It's easy to accidentally use one of these methods. You might not even know you're doing it. But when doing reviews, keep in mind that employees can handle negative feedback as long as it's honest and data driven.

Advice From Industry Leaders

Reviews shouldn’t be so painful. If done right, they can help both companies and employees succeed. Curious to find out how? We were too, so we asked managers for tips on how to make these reviews more efficient.

1. Let Employees Lead

Hank Boyer, President & CEO of Boyer Management Group, advises managers to let employees lead the performance discussion. To facilitate the discussion, he says, “Issue the completed evaluation to the employee three business days prior to holding the discussion [...] Few things are less effective than trying to hold a discussion while the employee is reading their evaluation for the first time.”

2. Nurture Your Employees

Ellie Mirman, VP of Marketing Toast, says, “Set quarterly goals around skill development that factors into the discussion to make sure each employee is growing.”

3. Kill the Time Lag

Lisa Mullen, Manager of Corporate Human Resources at Halogen Software, says, “The review process should be a year-round activity. Managers should take the opportunity to discuss and record milestones, accomplishments, successes, and challenges as they occur, when the details are fresh.”

How to Find the Right Timing

Feedback is time sensitive. But surprisingly, 75% of companies do these reviews annually, according to a survey by BLR. And the problem is that so much happens and changes in 12 months.

But also keep in mind that one type of frequency doesn’t triumph over all — weekly isn’t better than quarterly. But there are certain frequencies that function better for other objectives.

Advantages of Crowdsourced Reviews

In order to really gauge how an employee is performing, you need to poke and prod indirect managers, team leads, peers, or even employees from other departments. Globoforce highlights the importance of crowdsourcing feedback:

  • 80% of employees see crowdsourced feedback as more accurate
  • 80% of peer-reviewed employees get a better understanding of their strengths and weaknesses

Employees want to be evaluated by people other than their direct managers. Multiple viewpoints allow you to get a better understanding of an employee’s performance. And if those numbers still don’t convince you, consider these advantages of crowdsourced feedback:

Increased Accuracy

Crowdsourced reviews come from multiple people. Therefore you’re getting multiple stories. When these reviews are meshed together, a bigger, more comprehensive picture of the employee’s performance is put together for evaluation.

Performance Improvement

Employees gain valuable insight into their strengths and weaknesses from their colleagues because they have daily interactions with them. And this makes the process of improvement public. Employees must work harder to get better so they don’t let their peers down.

Encourage Recognition

Management can recognize employees for their big accomplishments, but coworkers see the small successes. Crowdsourced feedback builds a culture of open communication that involves feedback and recognition.

Management only sees part of the process, but they should be empowered to have the full story. Luckily, information from peers and other leaders gives them this opportunity.

Performance Reviews' Effect on the Bottom Line

Did you know having ineffective reviews can actually negatively impact a business’s success? Recurring mistakes, subpar work, and ignoring results can make your company tank.

Think back to how you’ve been approaching reviews. Consider where you might have gone wrong or what you can start doing differently to help your employees and business succeed.

1. Focus on the Future

Talking only about the past is just talking about events no one can go back and change. Spin these issues around and give the employees ways to improve in the future. According to this study, 70% of workers want reviews that help them develop and grow. So create objectives and goals that employees can work towards to make these reviews more efficient.

2. Compare to Industry Standards

Most companies compare employees to their peers. Do market research on industry standards. Figure out what your competitors are doing, their quality of work, and how they’re accomplishing these tasks. Races aren’t won through blind movement. Every person and company needs to be aware of where their competition stands in order to surpass them.

3. Effort Doesn’t Equal Success

Managers can see how hard an employee works, but they don’t want to be the bad guy by giving the hardworking employee a below-average review for their performance. An employee can work exceptionally hard, but what good is that effort when the end result is mediocre?

Performance reviews aren’t just indicators of how an employee is doing. They also give managers an insight into the current and future path of the company. Rethink how you approach these reviews in order to let your company succeed.

Sabrina Son
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Sabrina is a Content Marketing Specialist at TINYpulse, writing and researching ways to make employees happier. A Seattle native, she loves her mornings (or anytime) coffee, s ... Click for full bio

Most Read IRIS Articles of the Week: Feb 19-23

Most Read IRIS Articles of the Week: Feb 19-23

Here’s a look at the Top 11 Most Viewed Articles of the Week on, Feb 19-23, 2018

Click the headline to read the full article.  Enjoy!

1. Don’t Get Pinged by the Social Security Earnings Limit

I’d like to introduce you to Peggy. Born in 1956, Peggy will be 62 in 2018. She has worked in retail her whole life, the past twenty-five years spent in management. Peggy divorced from her husband 14 years ago, is still single and has no children. — Dana Anspach

2. We're Back to “Bad News is Good News” and “Good News is Great News”

This week the markets shrugged off last week’s fears and went back to the slow and steady melt up, despite economic news that looked likely to once again rock the boat. — Lenore Elle Hawkins

3. Q1 2018 Factor Views

Themes established in 2017 across a wide range of markets and factors continued to resonate through the fourth quarter. Economic growth was strong and supportive of equity markets across the globe, a range of volatility measures reached all-time lows, and business and consumer sentiment remained elevated. — Yazann Romahi and Garrett Norman

4. A Beneficial Basket of Commodities

Advisors and investors that feel they are hearing more and more about commodities and the corresponding exchange traded products in recent months are right. That is a natural result of dollar weakness and yes, the greenback is floundering again in 2018. — Tom Lydon

5. 3 Trends Shaping the Future of Asset Management

As the industry works to cope with new regulation, wades through an outpouring of new products, learns to satisfy investors’ shifting priorities and manages the active-passive debate, the viability of business units will be questioned, and at times radical measures will be taken. Peter Hopkins

6. 5 Ways Advisors Leave Money on the Table, and What to Do About It

My hope is that this article points out some opportunities for you to make more money and serve your clients at a higher level and that you decide to do something about it. — Bill Bachrach

7. The Market Has Gone Wild! Is It Time to Change Your Investment Strategy?

Whether the market is flying high or taunting your emotions with new lows and some bumpy volatility, here are four things every investor should keep in mind ... — Lauren Klein

8. How to Deepen Client Relations and Capture New Business Using Engaging Content

Why financial advisors NEED to understand much more clearly the power of good digital market. With tools like AdvisorStream, it’s easier than ever to get the content you need to drive leads and referrals today! — Kirk Lowe and Matt Halloran

9. Three Ways The Most Successful Gain Big Attention

How do some firms and ideas go from nowhere to everywhere in a few short months? All of a sudden a restaurant becomes popular, a gas station gains a cult following, or a Broadway show becomes too popular to get a ticket for years. — Maribeth Kuzmeski

10. Who Are the Hottest FinTech Firms and Influencers Around the World?

"Worldwide, $27.4 billion poured into fintech startups in 2017, Accenture reports, up 18% from 2016. With so much in play, it’s not surprising that 22 companies are new on this, the third edition of our list."  — Chris Skinner

11. The New Stock Market Normal Is Not What You Think!

Many sensational headlines have been written the past few weeks about market declines, but two things have increased for sure: the viewership and the ad revenues of financial media organizations — Preston McSwain​​​​​​​

Douglas Heikkinen
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IRIS Co-Founder and Producer of Perspective—a personal look at the industry, and notables who share what they’ve learned, regretted, won, lost and what continues ... Click for full bio