Performance reviews have a long history but are now falling out of favor with many companies. Recent studies show that annual reviews often cause anxiety and provide little useful performance improvement information. There are many problems with traditional performance review processes, including inconsistent ratings from managers, untrained managers, focus on individuals rather than teams, and lack of recognition for employee contributions. Many organizations are looking to revamp or replace performance review systems to address these issues.

1. David Nicoll, Ph.D.
Transformational Learning Opportunities
April 2018

2. Some History
Performance reviews are a very old practice
 Job ratings were used in China as early as the third century
 In the eighteen-hundreds, cotton mill owners hung color-coded
wooden blocks over employees’ work stations to indicate their merit
 Numerical ratings and multi-rater feedback processes were popular
performance review techniques throughout the 20th century.
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3. Today
Performance reviews are falling out of favor.
 Global firms like Microsoft and Gap are experimenting with different
approaches.
 Companies like Accenture, Adobe and Deloitte are getting rid of annual
evaluations altogether in favor of other approaches.
 Recent studies demonstrate that annual reviews, more often than not, tend
to be a source of anxiety and annoyance rather than a source of useful
performance improvement information
 Recent studies are suggesting that performance review processes do not
seriously impact either a department’s or an organization’s operational
performance
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4. Key Discoveries
 Performance reviews, for everyone, tend to be expensive processes
which no one likes and too few take seriously.
 The costs of performance reviews, both financial and psychic, is
apparently not worth the benefits in performance that they induce.
 The talent management process that suffers the most disdain around
the world is the performance review process.
 The first step towards revamping the performance review process is to
fully understand the problems associated with it.
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5. Three Major Problem Categories
Performance reviews have so many problems it’s difficult to identify them all. Some
research studies have listed as many as fifty problems. Many list ten or more problems.
Here are three major categories that serve to outline the problems that need attention, if and
when you’re interested in revamping your performance review system:
1. Manager Problems: Here the issue is the competence of the manager doing
the evaluation, especially the negative impact their idiosyncratic personality traits and biases
have on their evaluations.
2. Employee Problems: Here the issue is ability of the employee to receive and
make use of the evaluative feedback being offered to them, especially whether they’re
capable of using the information provided to help them organize a learning process that
improves their productivity.
3. Design/Process Problems: Here the issue is conceptual, especially whether
the performance review process as it’s designed and implemented by the organization and
its managers actually supports the employee’s learning and development, as well as the
overall improvement of their team, and the organization’s work processes.
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6. Manager Problems
1. Inconsistent Ratings: Inter-rater reliability is generally very low between managers in any
organization. What one manager considers to be "acceptable" performance, another may
consider "not meeting expectations." This can be a challenge for any organization, especially
where the criteria used are subjective and not based on any measurable performance
outcomes.
2. Poorly Trained Managers: Managers who evaluate employees need to know how to rate
their employees properly. Consequently, it is important that training is provided to introduce
managers to the philosophy of performance review at the organization, including a review of
the forms, the rating system, and how the data gathered will be used. However, in most
organizations, managers are not trained on how to assess and give honest feedback. When
the process includes a career development component, it is likely that managers will not
know how to establish developmental learning efforts for their employees.
3. Managerial Timidity: Too many managers will do almost anything to avoid tough
decisions or confrontation. Some use even distributions to avoid it, others give everyone
“above average” ratings. Some managers will provide feedback that is extremely vague in
order not to offend anyone.
4. Time Lapse Errors: Managers, especially those who don’t maintain on-going employee
data files, have a tendency to evaluate based primarily on events that occurred during the
last few months rather than over the entire year.
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7. Employee Problems
1. Employee Perceptions & Attitudes: When it comes to their own reviews, too many
employees, see performance reviews as judgmental processes intended to identify their
mistakes and deficiencies. They also see themselves in a subordinate role, necessarily in a
passive role and position, present only to receive and accept their boss’s judgments.
2. Employee Perceptions & Attitudes: Many employees are intimidated by their managers
and by the process. As a result, they say nothing during or after the appraisal. Because most
review processes are so too little about how to design and organize their own developmental
learning efforts. Therefore, they subjective and benchmark performance numbers are not set
in advance, uncertainty arises that can cause many employees high levels of anxiety weeks
before and after their review.
3. Employee Ignorance: Most employees know too little about the design and structure of
their jobs and/or the workflows and value chains that their job is a part of. Moreover, most
know too little about their company’s strategic situation and/or its competitive performance.
Accordingly, they know far too little about the contributions they could make, and as a result,
they are not in a position to do much with the feedback they get in their reviews.
4. Employee Ignorance: Most employees know too little about how to develop their own
knowledge and skills. They know ’re not in a good position to do much with the performance
feedback they get during their performance review.
5. Employee Disengagement: For a variety of reasons, too many employees today are not
personally or professionally invested in their company’s success. This too often means that,
when it comes to taking their performance reviews seriously, they aren’t that interested.
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8. Design & Process Problems
1. A Focus On Individual Employees: Most review processes are exclusively focused on
judging only individual employees, one at a time, in isolation. This makes it impossible to
assess the key issue at the heart of a performance review; i.e., when, where, and how the
employee contributed to their team’s and their value chain’s productively.
2. A Historical Bias: Most review processes are focused on capturing feedback about last
year rather than on discussing necessary changes to knowledge and skill requirements
necessitated by changes in the company’s business strategy. In this regard, employees
need feedback and goal planning much more frequently than annually; they need quarterly
performance feedback.
3. Performance Appraisal vs. Employee Development: Ostensibly, the purpose of a
review process is to provide developmental feedback that will help the employee strengthen
their skills and ability to contribute to the organization. But, review processes rarely focus on
where and how to develop the employee’s skills and abilities, nor do not provide for the
commitments of organizational time and resources for this developmental effort.
4. A Top Down Process: In most cases, employees have no input into the factors that they
are assessed on, how often they are assessed, and what type of feedback they can receive.
It’s even rare for a manager to routinely survey their employees for suggestions on how to
improve the review process.
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9. Design & Process Problems
5. No Choice Of Reviewers: Although there are a few exceptions, in most cases,
employees are not allowed input into who does their assessment.
6. No Appeal Process: Employees who disagree with their appraisal are seldom given the
opportunity to challenge the results with a neutral party.
7. A Value Chain Disconnect: Performance reviews generally ask managers to rate their
employees on isolated criteria such as "customer service skills" or "leadership ability.” Even
the best performance reviews rarely ask managers to rate their employees on the specific
ways in which they effectively contributed to the productivity of the workflows and value
chains that the manager is responsible for.
8. One Way Communication: Managers, who don't know any better, tend to make
performance appraisals into a one-way lecture about what the employee did or didn’t do
during the past year.
9. Too Little Recognition: In most organizations, the performance review process does not
recognize effort, personal sacrifice, and/or the support the employee offered to their peers
and team members.
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10. Design & Process Problems
10. No Integration: In most organizations, the performance review process is not an
integrated process that links the employee who’s being reviewed to the other employees
they work with, the team they’re a member of, or the value chain that they’re a part of.
11. A Judgmental Bias: Most reviews are one-way processes, focused exclusively on
judging the things that the employee being review did or did not do well during the review
period. For the employee being reviewed, this tends to create a parent/child scenario that
feels highly critical.
12. The Squeaky Wheel Focus: Most performance review systems focus on weak
performers. There is significantly less focus on top performers, and thus there is no
system to capture their best practices and then to share these with others.
13. No Second Review: Even though the process may have impacts on salary, job
security, and promotion, in many companies the assessment is done by a single
manager. If there is a second review, it may be cursory, and therefore not ensure
accuracy or fairness.
14. No Mid-Term Alerts: Most processes do not allow an employee to be notified
midstream should their performance change to the point where it is suddenly dramatically
below standards.
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11. 11
__________________________
Individual / Team
Date Key Moment
Potential/Actual
Contribution
Results /
Outcomes

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 David Nicoll, Ph.D.
 Transformational Learning Opportunities
 http://transformationallearningopportunities.com