Employee performance reviews are failing: how to fix them

What is an employee performance review?

Also known as a performance appraisal or evaluation, an employee performance review is an assessment for evaluating an employee's job performance and accomplishments over a specific period. It's an opportunity to provide constructive feedback to improve future performance and support organizational goals.

From enterprise level to startups, performance reviews are common practice in companies of all shapes and sizes. Though what they entail depends on the organization.

Types of performance review

Depending on your company's size, needs and culture, there are a variety of different performance reviews. Here are some of the most common types:

Skills evaluation

An assessment used to measure employee proficiency and competence in job-specific skills, tasks, or areas of expertise. For instance, a software engineer might be evaluated on their knowledge and familiarity with various frameworks and programming languages.

Informal "check-in"

Think of this method as a casual chat to discuss how things are going. In some organizations, this type of assessment will also involve employee health checks and other employee wellness measures.  

Managerial reviews

The more traditional model for performance evaluations. These involve a formal meeting between managers and employees, and allocation of a rating based on performance against specific job functions or how the employee works with the team as a whole.

Self-assessments

This form of self-appraisal gives employees the chance to rate and assess their own abilities against a range of metrics. These assessments should be structured against specific metrics rather than open-ended.

How they're failing (but why they still matter)

Though feedback is vital to keeping employee engagement high and staff turnover low,² many organizations struggle to sustain effective performance management systems. Here are some sobering statistics that demonstrate how the standard model of performance reviews is failing.

• Only 5% of HR managers are happy with the way performance reviews are conducted³
• 59% of employees feel that performance reviews have no impact on their personal performance⁴
• 74% of millennials feel "in the dark" about their job performance

Robert Sutton, author of a Gallup study⁵ on the effectiveness of performance reviews put it bluntly, when he said,"If performance reviews were a drug, they would not meet FDA approval for efficacy."

Though critical, he's clear that the current lack of efficacy is not a reason to ditch them altogether. Instead, he advocates for regular and constructive conversations with employees about how to improve their performance.

"When formal progress reviews are accompanied by frequent, honest feedback -- and the review is consistent with what you've heard all year -- they can be affirming, motivating and, at the very least, much less awkward."

Performance reviews are less likely to be effective if there isn't a coaching culture or a practice of regular, ongoing feedback in place. Employees shouldn't be blind-sided with feedback, whether it's positive or negative. Instead, performance reviews should be considered a formal reminder of feedback employees already receive continuously.

In short, the research points to continuous feedback being more helpful than annual or quarterly reviews alone. Though it's not enough to replace formal performance reviews, ongoing helpful feedback is key to making them effective.

The benefits of effective employee performance reviews

When done correctly, performance reviews offer a host of benefits that make them a valuable part of the performance management process. Here's what the research tells us:

They improve employee retention

When done right, employee performance reviews can increase employee retention.⁶ By giving your employees feedback, you're helping them develop their skills as well as recognizing their contributions. This leads to higher levels of employee engagement⁷ which may mean employees are less likely to look for another job.⁷

They boost employee development

Constructive, ongoing feedback can have a positive effect on employee development. Employees understand what they need to do to improve, performance issues can be identified, and it can help employees improve their skills.

They increase revenue

With an effective employee feedback system in place, companies benefit by raising rates of employee engagement. In a study on the financial impact of a positive employee experience, companies that ranked in the top quartile for employee engagement were also found to have higher revenue⁸ per employee.

How to map out an evidence-based performance review

To improve your performance review process, it's important to first lay out a solid plan. Here's what you need to do to map out a more effective process.

Define your goals -

Without a clear goal, performance appraisals often feel like another box-ticking exercise. If you want to make them count, it's important to be clear about why you're doing them, and what you want to achieve.

Choose a format that suits your needs

This depends on a number of factors including:

• Type of company
• Company culture
• Size of company
• Industry
• Goals
  
  

For instance, if you're a 5 employee startup operating out of a co-working space, annual appraisals with a very formal review process may not be in keeping with the company culture.

Deliver the review

Whichever format you choose, it's important that you identify both positive and negative feedback. Employees often feel discouraged when their weaknesses are identified, especially when they feel blind-sided. There is an important balance to strike here. While the once popular "feedback sandwich" method is now generally advised against,⁹ it is also important to balance positive feedback with negative feedback.

If there are significant issues, it might be worth creating an action plan for improvement. It's important not to be prescriptive about what this plan should be. Be prepared to discuss this with the employee and find a way to craft a performance improvement plan that suits both parties.

Set development goals

Once you’ve outlined your assessment, it’s important to set clear and actionable development goals. This is where F4Ss AI coach, Marlee can help. Trusted by teams around the globe, Marlee helps employees reach their development goals by identifying room for improvement, providing tailored coaching and enabling them to reach their professional goals.

Maintain communication

Remember that performance management isn't a simple one-and-done. After you've identified room for improvement and set development goals, you need to continue the dialogue beyond the review period. If you've set new goals or standards, be sure to check in with employees to ensure they're meeting them.

Taking an evidence-based approach to employee performance reviews with F4S

If you're looking for more effective ways of conducting a performance review, using an evidence-based approach will always yield better results. That's where F4S can help. Based on 20 years of research, use it to understand what drives your employees and how to get the best out of them.

The first step towards offering meaningful feedback is to understand your team and their motivations. Begin by taking our free assessment to understand your own motivations and blind spots. From here, you can set up a team, then compare your results with your team and other successful entrepreneurs and business builders to learn how you stack up.

By using evidence-based metrics, you can take the guesswork out of performance reviews, hone in on the unique motivational traits of each employee, and tailor your feedback to each employee for best results.

Let's say you have an employee that scores high on Lateral Thinking as opposed to being Methodical. When you're developing an action plan to improve their blindspots, this is worth keeping in mind. Lateral thinkers are creative problem solvers who love to come up with novel solutions to challenging problems. Producing a step-by-step roadmap toward reaching their developmental goals may not motivate them in the same way that a brainstorming session would.

Conversely, if you have a highly methodical employee who needs some help reaching their KPIs, giving them a structured development plan will work better.

If you're looking for more specific ways to help your team, read our effective performance review phrases (coming soon!) for each of the 48 motivational traits.

Performance review template

Looking to nail your next performance review? Download our free performance review template (coming soon!) to help get you started.

Performance review preparation in 6 easy steps

Ready to start preparing your performance reviews?  Follow these steps to get ready.

‍1. Clear your calendar - performance reviews can be all-consuming and a lot rides on getting them right. Keep an uncluttered calendar so you can focus on crafting your messaging and figure out the most effective way to deliver your feedback.

‍2. Consider the location - there are a number of aspects to consider when choosing your location. If you're a remote team, then a video meeting is a no-brainer. However, if you're in a busy office then thinking about where you'll conduct the review is important. You'll need to be sure your employees' privacy is respected, as well as finding a place that's quiet, comfortable and allows you to focus on the discussion.

‍3. Install the F4S for Zoom app - if you're conducting your performance reviews remotely, the app revolutionizes how you communicate and collaborate. The app adds your communication style to your Zoom profile and you’ll receive real time tips on how to work together.

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