Are performance reviews helpful or harmful?

K’aol nervously gets out of his car and walks to his Westlands office. He opens the main door to the office and looks around suspiciously. Who can he count on? Who plots against him? He dreads his 11am meeting.

Usually a happy employee very pleased with his position, the past week brought a lot of stress to K’aol. He faced trouble sleeping, arguments with his wife, and more agitation with his coworkers.

What could cause a normally positive employee so much unusual stress? His stress revolved around his upcoming performance review.

How many of you feel similar nerves and stress as K’aol did when your boss or the human resources department at your company notifies you that the time for your annual performance review has arrived?

Some people find the annual review process positive. Some employees find the process terrible. Where do you stand? Do you believe that annual reviews add value or cause unnecessary distress?

Corporations believe that performance reviews hold employees accountable for actions. Firms additionally feel that reviews provide valuable feedback to employees on how to improve their performance.

So, performance reviews remain entrenched in corporations around the world. The practice exists in nearly every organisation in the world.

However, a Globoforce survey in 2011 found that 24 per cent of workers feared the annual performance review more than anything else in their jobs the entire year. A further 55 per cent felt that their reviews did not reflect accurate information about themselves.

You see, there exists a disconnect between what science knows and what business does. A landmark study in the Harvard Business Review in 1965 highlighted the downsides of performance reviews. Unfortunately, the research had little impact on the practices in industry.

More recently, Sam Culbert at the University of California at Los Angeles researches the negative effects generated from performance reviews. Dr Culbert famously states “The performance review… is one of the most insidious, most damaging, and yet most ubiquitous of corporate activities. We all hate it. And yet nobody does anything about it.”

Extensive problems with performance reviews include primacy, recency, a halo effect, and projection. Bosses often maintain their first impressions on you from your very first day on the job.

If you stepped in the office confidently and dressed well on day one, then that primacy image of you lingers in your boss’ mind for years to come. However, the way you behaved in his or her mind on the first day actually contributes nothing to your actual performance in a calendar year.

Next, when preparing performance reviews, your boss only psychologically remembers roughly the last 90 days of your performance. As an example, if you brought a new profitable Sh90 million relationship into your firm in February, but you lost a Sh10 million client in November, then your December performance review would likely only reflect your lost client and not the older net gain. So, remembering only your recent successes or failures does not accurately portray your performance for the whole previous 12 months.

Further, your boss may form a general opinion about you based on only one general impression they hold in their minds about you. In the event that you usually show up to the office at 9am, later than other employees, your boss may only remember that impression that you constantly show up late. He or she may not take notice in their subconscious that you actually stay three hours later each evening than everyone else and provide more quality to the firm’s clients.

On the flip side, you could dress smartly and your boss gets the impression of you as a serious hard working employee, but ignores that you socialise most of the day and ignore some of your responsibilities.

The boss, essentially, puts a mental halo around you, like the way an angel in traditional paintings often appear with a halo around their head. These halo opinions about employees based on one trait do not hold true about someone’s general performance.

Finally, people tend to find similarity in people around them. A boss projects his or her belief that others are similar to him or herself. If a boss finds that he or she works best in the morning while having a harder time focusing later in the afternoon, then he or she will think that workers who come later but work later are less productive, even if factual evidence suggests otherwise.

On the other hand, if a boss values timeliness highly, then those late for meetings will hold a negative position in the boss’ mind. Do these projected opinions actually translate into actual success or failure for an employee in the office? Of course not.

Given the problems with performance reviews, do experts recommend that no employee feedback should be provided? No. Employees must receive feedback. So what do Dr Culbert and other experts recommend instead? Performance coaching.

Performance coaching involves encouraging and tracking regular intentional feedback between superiors and subordinates. Human resources departments should structure performance coaching to be as often as monthly between bosses and employees, but not longer than every three months. Feedback should go both ways.

Bosses, like employees, perform better when they receive timely feedback. Coaching should encompass ways to foster the employee’s long-term career path. The boss should show his or her benevolence, or goodwill, towards the employee and the desire for the employee to succeed in the short and long-term. Do away with formal reviews that are infrequent with formal signatures and ratings.

Professor Scott serves as the Director of the New Economy Venture Accelerator (NEVA) at USIU’s Chandaria School of Business and Colorado State University, www.usiu.ac.ke/gsse, and may be reached on: [email protected] or follow on Twitter: @ScottProfessor.