How to Fix an Unpopular Performance Review System

The legacy approach to employee performance reviews is not only ineffective; it’s harmful to your employees’ morale.

During an episode of the HRMorning podcast “Voices of HR,” employee engagement expert, author, keynote speaker and leadership trainer Jason Lauritsen said traditional annual performance reviews are like sneak attacks that, more often than not, make employees defensive.

“On a very fundamental level, it actually violates the [employer-employee] relationship. It violates trust. It doesn’t make people feel valued. It doesn’t make you feel appreciated. It actually does the opposite when we do it the way that we’ve traditionally designed it,” he said.

And tying performance reviews to compensation or reduction in force decisions makes it worse. “You’re saving up this feedback to give to me in this appraisal that now is going to minimize the raise I’m going to get … or the future opportunity that I’m going to get. … It doesn’t feel right,” he said. “Decouple it from compensation. … Put them on different cycles.”

Other problems with annual performance reviews include:

• Rater bias: Subjective numbered performance ratings often reflect the biases of the rater rather than the actual performance of the employee, Lauritsen said.
• Missed opportunities to discuss employee development: Infrequent feedback hinders employee growth.
• Inaccurate reflection: Once-a-year appraisals often don’t take into consideration the ongoing contributions and challenges faced by employees throughout the year.

A Better Approach to Performance Review

Lauritsen advocated for a shift from annual performance reviews to a culture of continuous performance management, where the assumption is that people want to succeed instead of fail. This approach entails:

• Regular feedback: Providing ongoing coaching and feedback instead of waiting for a yearly review.
• Manager development: Equipping managers with the skills to provide constructive feedback and foster a growth mindset.
• Clarity of expectations: Setting clear and achievable goals at the beginning of the year and tracking progress throughout, and
• Relationship building: Cultivating trust and rapport between managers and employees to encourage open communication. Lauritsen recommended regular, scheduled one-on-one meetings.

You can still conduct a comprehensive performance review, he said. Just format it as a narrative instead of a list of ratings scores.

“If they’re doing all of those things, when they get to the performance appraisal process … all it should ever be is sort of a year in review. … ‘Let’s talk about the wins. Let’s talk about the things that we’ve agreed that we want to work on next year. And let’s put most of our focus on how we’re going to perform next year, what our focus is going to be, what we need to learn next year.’ … Nothing should be a surprise in that appraisal,” Lauritsen said.

“If … you don’t have a lot of time, at the very, very least, encourage your managers to have some calibration conversations with their people ahead of the actual appraisal itself. … Create the appraisal almost as a documentation of that conversation.”

How HR Can Lead the Change

Because change is usually not easy, it’s going to take collaboration with key stakeholders to design a performance management system that aligns with your organization’s goals and values and adequately prepares your managers for a transition to having continuous coaching and performance conversations with their team members.

“They’re not managing machines. They are managing these growing, these developing, imperfect human beings who have needs and are facing obstacles and really want to be successful. And if they’re not, then that means there’s something going on that you need to solve for them or help them with. And when you get that shift made, things start to change,” Lauritsen said.

By embracing continuous performance management, HR can empower managers to create a work environment that fosters employee engagement and where employees are put in positions to succeed.