Employee Reviews: What Are They Good For?

Published: Apr 27, 2015

 Consulting       Interviewing       MBA       Salary & Benefits       Workplace Issues       
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When was the last time that you had an employee review?

Now ask yourself the same question, but tack on the words "that served any purpose beyond paper-pushing" to the end. Do you still get the same answer? If not, you're not alone: according to a recent Wall Street Journal piece, many companies are finally coming to a realization that their employees had a long time ago: most employee review systems are terrible.

The reasons for that are manifold, with the Journal piece citing one major drawback:

At Intel, around 70% of employees are graded as "successful" each year—a rating that is just one rung above the lowest possible rating of "needs improvement", and which tends to "deflate morale."

Even ardent adherents to the possibilities of the bell curve should be able to spot the difficulty with that last stat: when your employees become conscious that they're not setting the curve, or realistically have any hope of doing so, it can be difficult for them to stay motivated.

To its credit, that's something that Intel has realized, with the article describing a pilot program that the firm tried in an attempt to move away from rating employees while still offering feedback. But while it was successful, "company executives weren’t ready to give the labels up, concerned that forgoing ratings would suck healthy tension out of the workplace."

That perspective, like so much of corporate life, was shrewdly skewered in a recent Mad Men episode:  the character of Peggy Olsen expressed frustration over being asked to conduct her own appraisal—a request that she interpreted as a cop-out from her boss, and which she felt meant that her efforts over the previous year would go unnoticed. A subsequent conversation with Don Draper, of whom she demanded a formal review, further exacerbated her angst as he attempted to use the process for his own ends: probing her for ideas that he could use for a speech he had to write about the firm's future. The message: that the review process exists for the convenience of managers, as opposed to functioning as a genuine feedback loop for improving employee performance.

Back in the non-fictional world, meanwhile, the WSJ reports that "At Deloitte LLP, the company recently overhauled its performance-management system after realizing that ratings revealed more about the manager assigning the ratings than the employees themselves", while also citing research that shows that "ratings don’t have a direct impact on performance."

Unfortunately, it doesn't seem like the employee review is quite ready for retirement just yet. For as long as there are managers, there will be attempts to measure, quantify and rank the performance of employees—with the proliferation of data analysis tools and advanced metrics simply adding to the process.

There are, however, signs that some firms are starting to understand that a commitment to employee growth and training can have a much more beneficial effect on performance than the practice of grading an employee's performance (or having the employee do it themselves) every few months. The WSJ cites a couple of firms, such as the Gap and Microsoft, who are exploring alternative approaches.

I've covered the concept of "stack ranking"—the system being abandoned by Microsoft—in these pages before, but I reiterate the conclusion that I offered back then as well: if you're truly interested in the growth of your career, it pays to look into how a firm evaluates and supports its employees—ideally before making an application, but definitely during the interview process.

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