“Perhaps no talent management process is more important or more reviled than performance management.” Effram & Ort, 2013

In one of the most viewed documents on the web, Netflix, the streaming company with over 2,000 employees, revealed it has no mandated system of performance assessment. While this caused a flurry of interest, going process-free seems to be more of an exception than a trend; 95% [PDF] of organisations still report having a formal performance review system in place.

Is walking away the right thing to do?

As one of the world’s leading researchers on Organisational Behaviour, Professor Robert I. Sutton stated; “In the typical case (of performance reviews), it’s done so badly, it’s better not to do it at all.”

Still, throwing out the system entirely seems like a reactionary move. A more astute HR manager should have spotted the other side to this statement; to do it better.

From our knowledge of the research and best-practices, we’ve selected four big improvement themes that should help you cure your performance management process.

Evaluative vs developmental

A particularly pertinent theme within the organisational psychology research literature is the differentiation between the evaluative and developmental functions of the performance review.

Many organisations suffer from an archaic review process that is far too skewed towards ‘judging’ employee performance. The evidence suggests that this will reduce employee motivation, performance and ultimately satisfaction. Equally, these kinds of top down appraisal meetings will drive out any conversations around development – a key requirement to ensure employee satisfaction.

A survey of 700 high performers across a range of organisations found that a lack of development conversations correlated with intentions to exit. Those that felt they lacked an adequate platform to have this discussion were three times more likely to be planning to leave their organisation in the next 12 months.

Fix: Trying to cram conversations about performance past, present, future and bonuses into a single annual meeting is not feasible. Ensure the developmental conversation is not lost by having multiple meetings across the year that focus on a distinct area; i.e. objective setting, development planning and salary & bonuses.

People vs Processes

When dealing with performance reviews, it is easy to focus on the processes and forget what it is actually about – the employees. The bureaucratic process that exists within many organisations has reduced potentially valuable conversations to eternal “form-filling exercises” and everlasting “box-ticking”.

Even more telling is the negativity expressed on the manager side – senior individuals who are responsible for discussing employee’s performance, report feelings of dread in the run-up to meetings. Anecdotal reports suggest that managers may collude with employees to meet the minimum administrative requirements. The result? The fundamental issue of performance management has lost out to the goal of sending a completed form on time.

Fix: Managers need to be your performance review advocates, so involve them in process creation and improvement plans. Equally, training programmes will help give individuals the confidence and capability to deliver one-to-one development meetings, provide constructive and regular feedback, and create a supportive work environment within which your talented employees will thrive.

Individual objectives vs. organisational goals

To truly understand their own achievements and aims, employees need to understand where their goals fit within the bigger picture. Indeed, the most effective companies ensure that employees actively set their objectives within the context of organisational goals. Research has shown that employees who clearly understand the vision and mission of the organisation are more motivated and engaged in their own development.

Fix: Use content, communications, review forms and informal touch-points to continually communicate the overall objectives of the company. For example; the introductory section of a review form could provide individuals with an update on organisational priorities.

Storytelling is also a positive way to educate employees about the overarching successes and strengths of the business. Sharing stories from employees across the organisation will help to boost understanding and reinforce useful norms.

Collaboration vs. calibration

It is a sad fact that the more organisations work on trying to make performance ratings fair, the less trust employees have in the system. Forced distributions and calibration meetings aim to reduce biases in the system, but often serve to make employees feel their ratings are being ‘fiddled’ with.

Equally, if the ratings produced by these processes are ultimately linked to monetary rewards, employee satisfaction can plummet. The system will appear to be less about their performance, and more of an attempt to reduce bonus pay out. Calibration processes can also damage management relationships by undermining their influence.

Fix: Foster collaboration and participation from the employees in their own review scores. Employees will feel more satisfied with the process as a whole, have improved motivation, and will demonstrate fewer concerns about ‘unethical treatment’. If you are concerned about bias in the numbers, simply providing clearer guidance for managers will ensure their ratings are fair and in line with organisational expectations.

Don’t scrap it all

It may be easier to ditch the process then implement improvement in performance reviews, but we’d argue that it is too valuable to employee motivation, satisfaction and development to simply walk away. Positive fixes can be achieved by a thorough understanding of human behaviour and industry know-how.

Using some proven psychological insights to focus on development, turn your managers into advocates, and bridge the perception gap between individuals and your organisation, will make your performance management system irreplaceable.