3 Managerial Mistakes To Avoid In Year-End Performance Reviews

3 Managerial Mistakes To Avoid In Year-End Performance Reviews
Summary: As the year is ending, the season for performance reviews is upon us. This article shows how to do this best; by de-coupling the performance discussion from the compensation discussion and by avoiding "the fight-or-flight response" by presenting transparent and objective metrics.

What Managers Need To Avoid In Year-End Performance Reviews

In the past year or so, many companies have announced they will abandon the traditional performance reviews. Companies have discovered that the traditional process takes thousands of hours for managers and that the annual goals often get stale. There is a growing realization that there is a need to provide employees with timely feedback instead. This way employees can correct and improve their performance. As part of this realization, the practice of forced rankings (putting all employees on a scale of 1-5, for instance) is being abandoned.

Explaining the reason for their shift to a new type of performance management, Deloitte, one of the “Big Four” accounting firms and the largest professional services network in the world by revenue and number of professionals, said:

They, and we, are in need of something nimbler, real-time, and more individualized — something squarely focused on fueling performance in the future rather than assessing it in the past… We’ve arrived at a very different and much simpler design for managing people’s performance. Its hallmarks are speed, agility, one-size-fits-one, and constant learning, and it’s underpinned by a new way of collecting reliable performance data.

If your company isn’t quite on the brink of abandoning these performance reviews altogether as did Accenture last year, at least make sure you avoid these 3 critical mistakes when you review employee performance at year-end.

1. Initiating The Fight Or Flight Response

When employees are reviewed (and know their review is tied to compensation), they feel intensely and personally threatened. This triggers a fight or flight response — as does labeling people by ranking. This is the opposite of what you’d like them to do, since they won’t be listening to anything you say and they certainly won’t be motivated. This certainly won’t be an opportunity to learn. The solution is to disconnect a discussion about performance with one about compensation. They are two separate issues.

2. Not Being Objective

We all have biases, and a manager can think an average performer is great and a poor performer is a good one. Employees, on their hand, want objective fairness. So if the manager doesn’t prepare well and says that an employee was average and that employee then checks everyone else’s numbers and sees they were actually much better, the employee will feel that it isn’t fair. Try to avoid this at all costs.

Rating skills isn’t science nor art, and ratings reflect very little truth. To end with another quote by Deloitte and to offer some food for thought,

The most comprehensive research on what ratings actually measure was conducted by Michael Mount, Steven Scullen, and Maynard Goff … Their study —in which 4,492 managers were rated on certain performance dimensions by two bosses, two peers, and two subordinates— revealed that 62% of the variance in the ratings could be accounted for by individual raters’ peculiarities of perception. Actual performance accounted for only 21% of the variance. This led the researchers to conclude … most of what is being measured by the ratings is the unique rating tendencies of the rater. Thus ratings reveal more about the rater than they do about the ratee.

Performance management should be perceived as fair, transparent, and objective. Looking at gamification for employee engagement, we can imagine a system where everyone is rated based on the same elements in the same way. This fairness takes away a lot of the psychological distress and dis-engagement associated with a sense of unfairness. It also helps the organization to better calibrate itself.

3. Dwelling In The Past

One of the problematic things about performance reviews is the fact that if they are done once a year, then employees are always evaluated compared to fairly stale goals that were determined over a year ago. This means that the review can actually veer onto a discussion about a goal that is no longer relevant – and not cover a more recent achievement. For this reason timely feedback is essential, as it gives an employee enough time to re-work what they are doing, instead of gazing at the past and regretting it. According to Mario Herger, the beauty of gamification is that you can fail, get up, and do it again. Just like in a real game, you lose lives again and again till you figure out a certain level. Good feedback is timely enough to let you fail, get up, and fix your act. Gamification, in many senses, is just that since it tells you how you’re doing almost immediately based on the actions you’ve performed in enterprise applications rather than at one point at the end of the year when it’s too late to fix anything! It’s like a fitbit for work.

Final Word 

Bottom line, when reviewing performance be fair and transparent. Explain what is the source of your understanding of the employee’s performance. Take care to use goals and objectives that are relevant to the specific employee – don’t make them feel they are forcibly ranked against others. Above all, de-couple the discussion of performance – which should be open, honest, and flexible from the inflexible determination of compensation.