Performance Reviews: Why Bother? “The best kind of performance review is no performance review”

Performance Reviews: Why Bother?

By Claire Suddath November 07, 2013

When Peter Gross, an editor in the financial services industry in Virginia, walked into his 2008 yearend performance review, he was feeling pretty good. “I knew I’d get dinged on some nebulous things like ‘initiative’ and ‘enthusiasm,’ ” he says. “But on the measurable stuff, I’d exceeded all my goals.” So he was taken aback when, on a scale from one to five, his manager gave him mostly twos and threes. “I remember there was one thing I was supposed to do 30 times over the course of year, and I’d done it 49 times, but I still only got ‘meets expectations,’ ” he recalls. Every year after that, Gross worried for weeks leading up to his annual review. “I was a mess,” he says. “I’d be up stress-eating until 2:30 in the morning, and of course the actual day was nerve-racking.”Performance reviews can be traced to the 1930s, when a Harvard Business School professor named Elton Mayo studied the behavior of workers in a Western Electric factory. He found that happiness and productivity were directly related to the social structure of the workplace. Suddenly it wasn’t enough to just hire someone to do a job; bosses had to manage and mentor people, too. They did that, usually, with formal meetings. In 1950 the U.S. government institutionalized this with the Performance Rating Act, which mandated annual reviews of federal employees. Later laws would tie bonuses and salaries to these assessments.

Unsurprisingly, hauling people into a conference room and rating them on a numerical scale isn’t a popular practice. A 1997 national survey by the Society for Human Resource Management found that only 5 percent of employees were satisfied (42 percent were dissatisfied) with their companies’ review process. Even those who should be its champion—HR departments—can barely muster enthusiasm. A 2010 Sibson Consulting study found that 58 percent of HR managers dislike their own review systems.

“The best kind of performance review is no performance review,” says Aubrey Daniels, a clinical psychologist turned management consultant who coined the term “performance management” in the 1970s. “It’s a sadistic process for what purpose I don’t know.” Take Microsoft’s (MSFT) “stack racking” method. The system grades employees on a curve, meaning a certain number must be labeled underperformers. Stack ranking creates a sense of helplessness and failure and “encouraged people to backstab their co-workers,” as David Auerbach, a former Microsoft software engineer, put it.

The biggest problem with reviews, Daniels says, is that they happen too infrequently. Managers should address issues when they arise, not six or eight months later. “Think of a sports team: A coach doesn’t wait until the end of a season to give his players feedback,” he says. A sit-down with your superior can be beneficial, but the discussion should be forward-looking, not a nitpicking appraisal of the past. “[My boss’s] rule is that if you’re hearing something for the first time in the annual review, that he hasn’t done his job right,” says Emily Faye Abbott, an assistant district attorney in Knoxville, Tenn.

“Mainstream management is embedded in, and relies on, a culture of domination,” writes UCLA Anderson School of Management professor Samuel Culbert in Get Rid of the Performance Review!, “and the performance review is the biggest hammer management has.” Feedback shouldn’t be like a report card, Culbert says. Daniels urges his clients to eliminate the process, and says one of them, Blue Cross & Blue Shield of Alabama, is considering it. “I’ve convinced them they don’t need it, but they haven’t totally abandoned it. It’s scary for a company to drop a procedure they’ve been doing for years.”

The true goal of the performance review isn’t to help the employee—it’s to help the company. “A lot of people won’t tell you this, but they don’t need to document your good performance, just your poor one,” Daniels says. “That way they have written documentation that’ll help them get rid of you without fear of retribution.”

Despite his lackluster review, Gross wasn’t fired. He still works at the same company, under a different manager he likes much better. “Even if he rates me the same way, it won’t mean as much, because I know he doesn’t care about specific numbers,” he says. “Now I’m OK with being average.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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