Setting aside opinion and preference, what are the cold, hard facts about performance reviews and how can we incorporate them into our performance management systems?

At Clear Review, what we love about the field of performance management is that it is constantly evolving. We’re always keeping our eye on the latest performance management trends and how traditional practices, such as the annual performance appraisal process, are shifting to accommodate new research and generational preferences.

Lots of people have strong views about performance management. But if you are considering changing your performance management system in your organisation, it’s best to start by looking at factual research rather than subjective opinions.

Below is a summary of some of the science behind performance reviews and how to use this research to achieve the maximum value from your performance management.

Criticism by a manager can have a hugely negative impact on an employee

The impact of negative comments during performance reviews is something we’ve known for many years. In fact, it was covered in a 1957 Harvard Business Review article titled An Uneasy Look at Performance Appraisals, by the renowned Douglas McGregor.

This might cause some confusion, given that we know employees want more feedback. They want to know how they are performing and how they can improve, yet negative feedback does cause damage. It can also prompt employees to behave in a defensive manner, which means they won’t be taking any of the feedback on board.

In one study, carried out by scientists at Kansas State University, negative feedback (even feedback believed to be ‘constructive criticism’) can demotivate employees who would otherwise be enthusiastic and engaged. Further to this, a study of over 1,000 millennial employees found that after their annual performance reviews, half the respondents were left with a feeling that they couldn’t do anything right. Fast Company asserts that more than half of millennials have reacted to a performance review by ‘looking for a new job, complaining to coworkers, cursing, or crying’.

The evidence doesn’t end there. According to a Gallup poll, employees are far less likely to be engaged if they agreed with the sentence: ‘my supervisor focuses on my weaknesses or negative characteristics’. The only people who are more actively disengaged are those who are completely ignored.

So, what’s the solution? Are we meant to simply turn a blind eye to poor employee performance? Of course not — doing so would mean that they would never get a chance to improve. But, feedback can be given in a way that does not damage morale.

Firstly, managers should be trained to give the appropriate balance of positive and constructive feedback – ideally a 3:1 ratio. Employees who receive more positive than negative feedback are more productive, engaged and loyal to an organisation. Secondly, train your managers to focus on strengths during performance conversations, rather than just areas for improvement. Research from Gallup shows that employees who use their strengths significantly outperform those who don’t.

Regular one-to-one meetings results in more engaged and productive employees

In a TriNet study, nearly 85% of millennials believed they would be more confident and capable in their work if they were able to have more frequent communication with their managers. This is unsurprising when you consider the significance of the role of a manager on engagement levels and organisational performance. In fact, employees whose managers hold regular meetings with them are almost 3 times as likely to be engaged.

With this in mind, a once or twice a year performance review is simply not sufficient when it comes to quality coaching and employee support. Such communication should happen on a day-to-day basis, in real-time, with more detailed check-ins occurring monthly. Once companies incorporate continuous performance management discussions, they’ll find that conversations become more honest and far more fluid. Employees will understand what is expected of them and what their priorities are in terms of performance and development.

If you don’t know what to discuss during these monthly meetings, the Clear Review team have made it easy for you and prepared a free one-to-one meeting template to get you started.

Clear, SMART objectives improve performance

Unfortunately, goal-setting isn’t made a priority in all businesses, which is surprising given all the benefits it offers. According to a Gallup poll, half of employees don’t really know what’s expected of them at work. They are simply trying to do their best without appropriate guidance. Although this might be well-intentioned, without clear, measurable goals, employees aren’t likely to live up to expectations.

All employees should have clear priorities or targets and agreed deadlines for completion — and research has shown that when employees have active participation in their objective setting, they are far more driven and perform to a much higher standard.

Few managers and employees are content with their current performance review process

It probably won’t surprise you to hear that most managers and employees aren’t overly keen on their existing performance management systems. In fact, according to one study, 87% of participants found their annual reviews to be ineffective. Another source gives similar results, showing that only 14% of organisations are happy with their performance management systems.

Annual appraisals fill everyone with dread and panic, usually because they are trying to achieve too many outcomes from one meeting and there is often so much riding on them. When reviews are held more frequently, they become more informal, constructive and honest, which means they genuinely lead to improved performance – something that annual appraisals have never been proven to do.

Employee performance ratings could be doing more harm than good

Are performance ratings useful? Research indicates that in all likelihood, they are doing your business more harm than good in the long term. One source shows how they can activate the ‘fight or flight’ response in the brain because they are so tremendously stressful and intense. But why do we use performance reviews and where did they originate?

During World War I, the US military created a merit-rating system that was designed to flag and dismiss poorly-performing employees. By the time World War II came around, this had evolved into a forced ranking system, which was meant to identify high-performing employees with the potential to become officers. By the 1940s, 60% of US companies were using a similar system to determine employee performance and allocate rewards and punishments, but ratings had their critics even back then. In fact, Douglas McGregor in 1957 said that employees who wanted to perform well would do so if supported properly — without the need for a carrot or a stick.

In most organisations, ratings are deemed necessary in order to drive performance related pay decisions. But research has also found that performance ratings are so prone to bias and ‘reverse engineering’ that they have little correlation with actual performance.  Whilst many companies have decided to ditch ratings, many organisations are confused about what to replace them with. This is a complex topic so we have written a dedicated eBook on the latest approaches to managing performance related pay which you can read for free here.

If you want to adapt or overhaul your employee review process and you’re looking for employee performance software to help you on your way, Clear Review can help you. Clear Review software is simple, intelligent and easy to use. To get you started, you can book a free performance management software demo right now.