CIPD: Organisations need a review of how they review performance

Written by
Ksenia Zheltoukhova

19 Nov 2014

19 Nov 2014 • by Ksenia Zheltoukhova

Is performance review a tick-box exercise?

Performance management is one of the most important processes in an organisation. Regular appraisals, regular multi-source feedback on performance, and individual performance-related pay are among the high-performance working practices that contribute to more engaged and empowered workforces, and more successful organisations. So why have so many employees lost faith in performance appraisals, with over 40% employees in the CIPD Employee Outlook saying their performance review is a tick-box exercise?

Some of the bad press around performance reviews may be associated specifically with appraisals that involve ratings or rankings that can also be linked to pay. Rock, Davis and Jones (2014) draw on the insights from neuroscience to show that ranking initiates a 'flight or fight' brain response, not just because the individual in question hasn’t been scored high enough, but because others have scored higher. However, such a reaction prevents genuine reflection and considered conversation during performance reviews.

Another problem with some of the performance management systems geared towards the outcomes is that they over-emphasise documentation of shortcomings, and force fault-finding, particularly if the number of available ratings at the top end of the scale is limited. Unwilling to take the risk of getting a low score, employees might resist feedback, avoid stretching goals, put all their effort into seeking approval, and see others’ success as a threat.

Are appraisals fair?

Another factor associated with employees’ views on the quality of performance reviews is the fairness of the process itself. CIPD research shows that only 39% of employees believe their organisation’s performance management process is fair. This is despite the fact that 56% say they communicate effectively with their line manager on the objectives that need to be achieved.

Perceived fairness of the performance review is not only about the outcomes of the process. Overall, individuals who have a pay rise following their performance review are more likely to be motivated and satisfied in their jobs. However, if the performance review process is viewed as a tick-box exercise, inconsistent and not transparent, employees’ motivation and job satisfaction levels are lower than those of employees who had a pay cut or whose pay stayed the same, but who had a positive experience with their performance review.

Despite the somewhat negative attitudes to performance reviews, both employees and employers seem to agree on the core purpose of the process. The insights in how employees interact with the performance management process suggest that the ‘conversation’ part of the performance review appears to be the most valuable, with 81% saying that feedback and recognition was the most important part of their appraisal. Equally, conversations about progress and improvement are in the interest of employers, who are looking to achieve higher performance of staff. 

How to create a winning performance review

It seems that to achieve a win-win solution, there is a need for organisations to identify which aspects of the performance review process contribute to the developmental objectives of the review, and to do away with processes that don’t add value, and instead disengage people from the process. Some of the practices that organisations are trying out to refocus performance reviews on development are:

  • Continuous feedback: many managers would know what it feels like to complete annual performance reviews for all of their team members within a ‘special’ week or month. Having to do the appraisals in haste is bound to affect their quality, and once-a-year approach makes it difficult to remember and collect feedback. Instead, companies like Just Giving adopt a more fluid approach to reviews: for examples, managers and colleagues might be encouraged to give an individual feedback once a project or a task is finished, instead of waiting for the annual review round.
  • Focusing on strengths and future objectives: rigorous documenting of employee shortcomings or successes can help make a case for a particular performance ranking, but does little to develop or stretch the individual for better performance. IDEO recommends that managers check in with their employees weekly or fortnightly to discuss plans for the next task or project and work out how to maximise the chances of success for those. Frequent meetings allow for developmental conversations to be specific and relevant for the employees’ immediate needs.
  • Have open conversations across the business: having difficult conversations is one of the top concerns for line managers in the UK, and inability to bring up challenges can affect the quality of performance reviews. Netflix famously banned formal appraisals and turned to having fully transparent conversations across the business – about what’s going well, and what can be improved.
  • Performance requirements aligned with the values: many companies have tried to incorporate behaviours in their competency frameworks, but struggle to find a common language to record examples of such behaviours in performance reviews. Organisations like Valve provide employees with ‘handbooks’ of what is expected of them in terms of behaviours and values, and align performance management mechanisms with those.

These practices are just some of the examples of what organisations are finding to be working in performance management. Although there is no set recipe for making appraisals more effective, a common emerging theme is developing a greater employee ownership of their development, and gaining their buy-in with the performance management process through ensuring that the reviews are relevant for their immediate and future needs.