3 major flaws in enterprise performance reviews, and how to fix them

More than 90% of employees want consistent feedback, but most companies have not updated goal setting procedures to match the current state of work.

3 major flaws in enterprise performance reviews and how to fix them

Performance reviews may have a negative reputation, but more than 90% of employees actually look forward to the feedback, according to recent research from 15five. These reviews provide employees the opportunity to grow from their mistakes, and build upon their strengths. Additionally, performance reviews show employees how they stack up to one another, motivating each other to push harder or focus on certain qualities, said Gartner group vice president Brian Kropp.

Performance reviews are also vital to the organization, not just the employee, Kropp said. "We need it as a device to figure out who's making the biggest difference in terms of performance of the company," he added.

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These reviews are at their core a measure of how employees are performing in their positions. "Most company's performance reviews happen every either six months or 12 months. The manager of that employee collects information based upon their own observation and feedback that they might get from that employee's co-workers, that employee's customers, or their manager's direct reports," Kropp said. "So at the start of the performance review period, there's a set of things that you want that person to accomplish, and you collect all that feedback to figure out if they actually accomplish what you wanted them to accomplish."

Performance reviews are centered around goals, which act as a baseline for what employees are aiming to achieve throughout the year. However, the process of conducting performance reviews has become outdated as the type of work people do has evolved, said Kropp.

"Typical performance review processes were designed for a world that was less dynamic and more task oriented," Kropp said. "What we find today is that work is highly unpredictable, less task-oriented, more collaborative, and more relationship-oriented."

The major flaws in performance reviews

Since the workplace has changed, the methods of measuring employee success must change as well. Here are the three main problems with current performance management systems, according to Kropp:

1. Performance reviews are too slow when adapting to how work changes within an organization

2. Performance reviews do not reflect the fact that work is less task-oriented and more intellectual-property oriented

3. Performance reviews don't reflect that work has moved away from being individualistic, and are now more team-oriented

What companies can do

Companies must think more dynamically about their performance review and goal-setting processes, Kropp said.

"That means shortening the amount of time periods that are associated with reviews--not once a year, but once every three months," he added. "Even if you're not shortening the time period, when your having conversations with employees on a monthly basis, go back and look at those goals and make sure those goals still make sense."

Performance reviews aren't just measure of who fulfilled an ambiguous quota, but rather, who made the biggest impact all around. "We want to design [reviews] in a way that isn't just a record of how people performed in the past, but is designed in a way where it gives information to employees to help them understand what they can be doing to perform better in the future," Kropp said. "So that our performance management systems are not just a system of record, but that they're a tool we use to improve the performance of our workforce going forward."

Metric scores are vital for performance reviews, according to Kropp. "You have to have a numeric based approach. The things that really matter are are you getting feedback from a lot of people; that could be employees, customers--other things other than the manger--instead of relying on that manager exclusively for the performance review," Kropp said.

Collaboration is key when assessing an employee's performance. Not only is their individual work important, but their overall performance has intrinsic value to a company, Kropp said. "How are they collaborating with others? How are they working as a team with others? That's critically important nowadays," he noted.

While the method and nature of performance reviews may need to change, the existence of the process does not. "Employees need to have a score to know how they benchmark and compare, because for employees that are struggling you need to be able to quantitatively show them that they are struggling," Kropp said. "And for employees that are doing really well, giving them a better score is actually a really powerful recognition tool. And then by having a score, it actually creates accountability for managers to actively get involved in the performance management process."

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Image: iStockphoto/Pattanaphong Khuankaew