Performance Reviews

In recent months the business press has reverberated with cheers for the end of performance reviews. “Performance reviews are getting sacked,” crows the BBC.

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May 16, 2017 – Online MCAT CARS Practice

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In recent months the business press has reverberated with cheers for the end of performance reviews. “Performance reviews are getting sacked,” crows the BBC. They “will soon be over for all of us”, rejoices the Financial Times. Such celebration is hardly surprising. Kevin Murphy, a performance-review guru at Colorado State University, sums up the general feeling about them: an “expensive and complex way of making people unhappy”. The problem is, they are not in fact being scrapped.

A survey in 2013 by Mercer, a consulting firm, of 1,000 employers in more than 50 countries reported that 94% of them undertook formal reviews of workers’ performance each year and 95% set individual goals for employees; 89% calculated an overall score for each worker and linked pay to these ratings. It is true that a number of big companies have announced that they are abandoning annual performance reviews; this month IBM did so, joining Accenture, Adobe, Deloitte, GE, Microsoft and Netflix. In reality, though, they are no more getting rid of performance reviews than a person who shifts from drinking whisky to wine is becoming teetotal. Employee reviews are being modified, not abolished, and not necessarily for the better.

Four changes are proving particularly popular. First, companies are getting rid of “ranking and yanking”, in which those with the lowest scores each year are sacked. GE, which practised this system with particular enthusiasm under its previous boss, Jack Welch, has now dropped it. Second, annual reviews are being replaced with more frequent ones—quarterly, or even weekly. Third, pay reviews and performance reviews are being separated. And fourth, some performance reviews are turning into performance “previews”, focusing more on discovering and developing employees’ potential than on rating their past work.

Is this new system of employee reviews any better than the old? There are good arguments for getting rid of ranking and yanking: the ritualistic decimation of the workforce on the basis of a single number routinely paralysed businesses in the run-up to each year’s reviews, killing creativity and setting workers against each other. Thereafter the picture is murkier.

Some of the arguments being advanced for the new-style reviews are hoopla. Deloitte says its new system is about “speed, agility, one-size-fits-one and constant learning”. The consulting firm’s employees sit down once a week with their “team leaders”. But good managers should give their charges constant feedback anyway. Adding another regular meeting to everyone’s calendar sounds like a formula for time-wasting. “One-size-fits-one” assessment is meaningless: a vital part of assessing people is measuring them against their peers—particularly when you have to think about who to promote or how to divvy out bonuses. It sounds nice to focus on people’s potential rather than their past performance. But how do you assess the former without considering the latter? And if decisions about pay are not based on performance, what will they be based on?

Some of the arguments are not just hoopla, but dangerous hoopla. Social scientists have repeatedly demonstrated that performance reviews are distorted by two things: office politics and grade inflation. Managers are susceptible to lobbying. They also have an incentive to put a positive spin on things, often against their own better judgment, because in assessing their subordinates’ performance they are, to a large extent, evaluating their own ability to manage. Deliver a series of damning verdicts on your team and you inevitably raise a red flag about your own leadership. But the more subjective the reviewing process becomes, the more powerful these distortions are likely to be: “instant” feedback sessions can easily become orgies of mutual praise that do not teach anybody anything.

For purists, such as Samuel Culbert of UCLA’s Anderson School of Management, this is proof that performance reviews are unsalvageable: better to get rid of them entirely than to replace one imperfect system with another. In fact there are good reasons why almost all organisations this side of Utopia use employee reviews of one type or another.

Companies are always having to make difficult decisions, whether allocating limited resources (such as promotions and bonuses) or sacking people if they hold the organisation back or if the market turns down. It is preferable to make such decisions on the back of robust criteria rather than on the basis of managerial whim. Increasingly, firms also have to defend those decisions in the courts against people who feel hard done by. Firms that embrace more touchy-feely assessment systems, let alone get rid of them entirely, may be setting themselves up for legal nightmares.

Annual performance reviews can certainly be improved. Companies need to put more effort into guarding the guards—training them in how to conduct reviews and holding them accountable if they are overgenerous or otherwise sloppy. Google wisely encourages its managers to review each other’s assessments. Bosses also need to be more rigorous about acting on what they discover: there is no point in amassing information about weak performers if you only act on it in a crisis.

However, provided they are carried out consistently, rationally and fairly, and supplemented with more frequent feedback, annual performance reviews have many virtues. They provide a way of measuring an employee’s development over time (it is odd that some of those who criticise annual feedback for being too slow also criticise companies for being too short-term). They also provide a way of measuring all a company’s employees against each other rather than just their immediate colleagues. Bill Clinton once said that the best approach to affirmative action was “mend it, don’t end it”. The same is true of annual performance reviews.

Adapted from Economist.

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This was an article on Economics.

Have a great day.
Jack Westin
MCAT CARS Instructor.
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23 Comments


  1. Author discusses pros and cons of annual performance reviews and ultimately decides that they need to be changed to have more robust criteria of evaluation.

    The tone sort of goes in the direction of advocating towards changing APR.

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  2. Performance reviews were modified author belives modification is not based on criteria too “feel good”belives there should be a change but the change done isnt sufficent

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  3. Advantages and disadvantages of PR + companies = modify it not end it

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  4. MI: Non-traditional performance reviews are short-sighted, inefficient and potentially legally problematic.

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  5. Review system okay needs to be mended with consistent, fair feedback

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  6. 1) Performance reviews are modified
    2) few good reasons to modify performance reviews

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  7. MIP: don’t scarp Performance Reviews –> make changes

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  8. Au: Annual performance reviews must be improved in order to be of great use

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  9. Performance reviews = good if improved

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  10. PR not gone, subjective PR bad, some annual PR good

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  11. The author talks about how performance review are being done, how often they are being perform and how they are being altered by politics, and economy views.

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  12. MI- Author discussed pros/cons with performance reviews, need for change not termination

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  13. The author talks about the amendment of annual performance reviews. The old “rank, yank” system was very much based on numbers which don’t always reflect a clear picture. But the new system isn’t the best either as they are not focusing on past performances but solely developing future goals. They need to taken into account the past in order to increase one’s potential and that cannot be done without comparison with one’s employees. The system also reduces legal consequences when employers have to fire people.
    However, going in the future, we must have a look at the review systems!

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  14. Performance reviews should be improved not abolished.

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  15. Should keep performance reviews but modify

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  16. Performance reviews : new system is not good
    But it shouldn’t be eliminated : it should be mended

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  17. Performance reviews have generally been a subject of controversy because the parties involved are open to influence by many subjective factors. The stickiness of this topic affects workers by inhibiting creativity and social interaction with their peers creating a stigmatized work place. The managers also fall into a position where their judgement may bring them into question, so reviews are not as effective or useful in all situations. Solutions to this issue involve getting rid of them altogether, however the author posits that this is not realistic and it is best to follow successful models in companies like google and improve upon this system.

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  18. MIP: P.R. can be improved upon; tone = neutral

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  19. PR = modified /=/ sacked. PR = important + virtues = needs improvement AU, mend don’t end RTA (Clinton), Author positive concerning PR

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  20. MIP: comparing old vs new PR; Best PR=improve old (CW+RTA)

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  21. Theme: Performance reviews definitely not as bad as they look, author tries to provide justifications to it (end of passage) and addresses the need to conduct them properly so we can reap the benefits. Author subscribes to saying about not reinventing the wheel (mend it, don’t end it).
    Tone: Informative, dismissive (author not convinced by proponents of the new system (Some of the arguments…..are hoopla; sounds like a formula for time-wasting; assessment id meaningless), skeptical (how do you assess the former without…..what will they be based on; not just hoopla, but dangerous hoopla), positive and optimistic that annual reviews will work will done right.
    Performance reviews are not getting scrapped, they are just being modified (rank and yank removed so people are not sacked for their poor reviews; reviews are now more frequent; reviews no longer pegged to pay; new reviews emphasize on discovering potentials not so much on rating past work and achievements)
    Pros – less competition amongst colleagues (setting workers against each other)
    Cons – new system still susceptible to office politics and grade inflation (managers are susceptible to lobbying) and managers are still concerned about others’ perception of their leadership should they grade poorly.
    Author feels annual reviews should definitely stay, they just need to be improved upon and not replaced (put more effort into guarding…training them in how to conduct reviews), gives supporting evidence by citing Google’s practice. They can be productive and beneficial if done right (provide a way of measuring an employee’s development…measuring all of a company’s employees)

    Reply

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