If you've been following the performance management space for any amount of time, you know how controversial performance reviews can be.
Still, they're often necessary. So once you're caught up on the research, once you've read all the headlines, once you've accepted the fact that we can (and should!) do better — where does that leave you? What can you actually do to make your employee appraisals more fair?
Here are 4 practical tips you can take back and apply to your appraisal process right now to make everyone feel better at work.
1. Don't compare employees' past track records
At work, as in relationships, there's nothing more annoying than being compared to someone else.
Research published in Organizational Behavior and Human Decision Processes (and summed up in this brilliant HBR article) examined four studies using data from 1,024 American and Dutch employees in order to compare two types of reference points in employee performance reviews.
The first reference point, called "temporal comparison evaluations", uses the employees’ own past performance to show them how they've progressed over time. The other reference point, called "social comparison evaluations", uses other employees’ performance during the same period, so that a manager can rate an employee based on how much better or worse they performed over their peers.
As you might expect, researchers found that participants who received temporal comparison evaluations (feedback based on their own past performance) had a much easier time getting on board with the feedback given. They felt their performance appraisal was more individualized, discerning and accurate. They felt they'd been treated with respect.
On the flipside, everyone (strong and poor performers alike), who received a social comparison evaluation, felt the appraisal was unfair.
2. Link performance to outcomes
But if you can't compare employees' past performance, what can you do?
Using clear and specific outcomes is a great way to show employees how their work makes a tangible impact on the bottom line, while proving that your appraisal process is anything but arbitrary.
The outcomes will of course vary from role to role, but a good place to start is to think about the KPIs that matter most to each department. Make sure they're things your employees can actually own. For example, increased revenue might be a great outcome for your sales reps, but does your engineering department truly have the tools, resources and autonomy needed to draw a clear line between their work and its impact on revenue? If yes, great!
But keep in mind, there's a reason 65% of employees say performance evaluations aren't relevant to their jobs. Holding your people accountable for outcomes they have no real impact on is a sure way to make them resent you, so choose wisely.
3. Know exactly what you're measuring
I once knew a star performer who was about a foot taller than everyone else on the team. At almost six feet tall, no matter what she wore, it looked "short".
Despite the fact that she consistently outperformed the rest of the team on all the departmental KPIs, she was always rated a 2 out of 5 on dress code. Rather than settle for wearing pants every day, she quit and became a manager at a competitor company.
When employee appraisals muddy the water between expectations and goals, confusion abounds. Managers can lose sight of what's really important in an effort to force a "cultural fit" — and that's a sure way to lose your best people.
Once you've identified the core metrics that really drive performance, consider dropping any expectations that don't actually move the needle on your goals. (And never, ever rate an employee on metrics that just don't matter.)
4. Define your performance management goals and values
Perhaps the biggest reason 71% of American employees surveyed by Gallup said their performance appraisals weren't fair, is because they don't know why they exist in the first place.
Fairness cannot exist without clarity. Yet, how many managers do you know who can actually explain why the performance review process exists in its current form? (And no, "figuring out who to keep and who to fire" isn't an answer that will inspire confidence from your employees.)
One great example of a company with a clear performance management goal is Huawei. The major manufacturer has a performance management goal of "development over time" and they're known for evaluating employees based on their own past performance. In the words of their founder, Ren Zhengfei, “I will not judge whether each team has done a good job or not, because all of you are moving forward. If you run faster than others and achieve more, you are heroes. But, if you run slowly, I won’t view you as underperformers.”
If it's time to rethink your employee appraisals, consider including your people in the process. There's no better way to establish an environment of trust and fairness, than to involve them in finding a better way forward.