Traditional performance reviews, like medical check-ups, can be anxiety-inducing. While they can be valuable, annual reviews are increasingly being phased out. In fact, 10 percent of Fortune 500 companies are eliminating them altogether; in 2011, that number was just one percent.  

Evidence has shown that performance reviews negatively impact employee productivity and satisfaction because they threaten their status, which restricts creativity and elevates stress. Doubts have also been cast upon their accuracy as an evaluation tool; a study from leadership advisory firm CEB found that two-thirds of employees who receive the highest scores in a typical performance management system are not actually the organisation’s highest performers. This means that people who deserve recognition may not be getting it, while employees who have other qualities, like charisma, are unduly rewarded. Despite these issues, feedback is essential to promoting employee engagement and growth, so long as it is data-driven and delivered in real-time.

Banishing bias from the review process

Annual performance reviews can be an unfair and flawed system. They create an environment where feedback gets stored up, so it is not delivered in the moment when it can have the greatest impact, and quickly becomes irrelevant. As a result, employees lose out on valuable opportunities to learn and are saddled with uncertainty about their performance, which may prevent them from reaching their full potential.

Rather than relying on subjective feedback, employers should look at metrics around employee performance that provide more accurate insight into how they are doing, which will vary depending on an employee’s role. For sales, it could be the number of deals closed or revenue generated. Alternatively, for customer service representatives, criteria might be queries answered and ratings on the quality of support. However, not all positions can quantify success as easily as others, particularly those judged by metrics such as quality of work and efficiency or intangible criteria such as helpfulness or initiative. Employees should not be penalised if their talents lie predominantly among these areas. To further remove bias, companies can also institute “Rate the Rater” policies, where a manager’s evaluation ratings are normalised if they are found to historically be outside a selected variance relative to their peers. This helps level the playing field if one manager is either notoriously tough or lenient.

Regardless of assessment measures, the real question is to what extent are employees meeting their goals? Is their work achieving what it’s supposed to achieve? Answering these questions requires leaders to be better attuned to each reviewee, weighing up an employee’s attributes to take advantage of their strengths in future projects. By taking tailored metrics into account when reviewing staff, employees feel more valued and are therefore likely to be more motivated and productive, which can only have a positive impact on the wider business.

Harnessing the data deluge

Outlining metrics, collecting data, and using that data as the foundation for discussions about performance also help to keep performance reviews fair. The focus on facts anchors the discussion, so employees don’t feel overlooked or misunderstood. Having this data to hand in an easily comparable format also allows managers to keep track of wider trends in employee needs, sentiment and performance. This growth in so-called ‘people analytics,’ seeing some firms combining internal and external employee information, means that managers can build up a comprehensive profile of the employees they review. The shifting HR landscape also ties closely to increasingly popular BYOD strategies, as companies now have the capability to deliver instant feedback to a mobile device following a meeting or presentation.

This, in turn, leads to another benefit of implementing a data-driven model. An important step towards keeping performance reviews fair, is giving feedback in real-time. By doing so, leaders can reinforce positive behaviours and deter negative ones before they become engrained, to help employees grow. These regular conversations provide a valuable baseline for discussion and prevent problems from stacking up, so that formal performance reviews don’t feel like an ambush. As millennials represent an increasingly large portion of the workforce, reviewers are seeing a desire for constant feedback. An organisation’s capacity to provide meaningful performance reviews that are tailored to the individual will be crucial for the retention of top talent.

Integrating data into the performance review process and breaking it out of the once-a-year model will make feedback delivery more fair, accurate and effective. Putting processes into place that are incompatible with bias and support the deluge of data flooding businesses can help keep employees clued up on their progress and make them feel valued. Organisations can transform performance reviews from a dreaded ordeal to one of the most positive aspects of their work experience, allowing managers to make more informed decisions about people, their most valuable asset.