The Case Against Performance Reviews

Workers hate evaluations. Managers hate evaluations. Is there any salvaging this sorry ritual? 
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If you hate performance reviews—and the "if" in that clause is ceremonial; you do hate them—don't blame your boss. Blame the Wei Dynasty.

Historians aren't sure who officially invented the annual ritual of grading our colleagues' performances (technically, a post-hunt slap on the back from a Neanderthal would qualify), but one of the earliest examples of formal appraisal comes from China's Wei Dynasty, around 230 AD, when an Imperial Rater invented a nine-grade system to evaluate members of the official family. History's first formal review wasn't much more popular than its recent iterations.  “The Imperial Rater seldom rates men according to their merits, but always according to his likes and dislikes," Chinese philosopher Sin Yu once lamented, futilely.

Eighteen centuries and several million futile laments later, performance reviews are alive and well. They peaked, perhaps, in the 1980s, when GE's Jack Welch used the rank-and-yank method to cull the worst-performing 10 percent of his workforce. Today, evals might be less draconian, but are they any less pointless?

Criticize Me, Please

"We'd rather be ruined by praise than saved by criticism," wrote Norman Vincent Peale, the author of the 1962 book The Power of Positive Thinking. It sounds like a glib aphorism, but that's actually pretty close to the research consensus. Criticism stinks.

In a recent study, Satoris Culbertson (Kansas State University), Jaime Henning (Eastern Kentucky University), and Stephanie Payne (Texas A&M University) ran a experiment to test whether certain goal-oriented workers might value constructive criticism. Many people just like to be coddled and constantly told how wonderful they are. Performance evaluations probably aren't their thing.

But what about workers who readily say they want to get better at their jobs—maybe they'd appreciate a critical nudge? Yeah, right. After administering negative feedback to both groups, the researchers found that the first group hated the feedback round, and the second group—employees with the strongest "learning-goal orientation"—was nearly as unhappy with the criticism.

Perhaps one specific group appreciates criticism: The workers least likely to be criticized.

One series of studies out of the University of Chicago found that people who are new to a job prefer bosses to act like cheerleaders. When you're trying to feel out whether a new job "fits," you want to be told: "You fit!" But experienced workers accept bosses who behave more like hard-knock coaches.

Why would better workers want more criticism? Maybe because they can take it. Maybe because they don't appreciate feeling babied. Maybe it's the openness to evaluation that makes them good in the first place. Or maybe it's because experts, unlike novices, aren't looking for positive reinforcement, at all. They're seeking mastery. Praise is fine at the beginning, the researchers concluded, because it makes beginners feel more committed. But eventually, too much positive feedback starts to feel kinda ... boring.

In the paper, "How Positive and Negative Feedback Motivate Goal Pursuit," Ayelet Fishbach, Tal Eyal , and Stacey R. Finkelstein make a fascinating observation about the interplay between feedback and moods. In their words...

When people attribute their mood to the feedback they received, the mood provides progress information and people are more likely to adhere to their goals when they are in a bad mood. However, when people attribute their mood to a goal-unrelated source, the mood signals to them whether to commit to a goal. In addition to general moods, distinct emotions signal the level of attainment on specific goals, such that people infer from their emotional experience (e.g., pride versus happiness) which of their simultaneous goals (e.g., long- versus short-term) they neglected or toward which they made sufficient progress.

... and in mine: Bosses shouldn't let a great worker feel too accomplished, or let a novice feel too hopeless. Overall, a good group of workers will always feel happy but never quite feel done. "Managers can encourage goal pursuit by offering positive feedback to novices and increasing the negative feedback as the recipients gain expertise," they conclude. So, start nice, get mean.

Rater Hater

The problem with many great workers is they know how great they are, which puts them near the danger zone of boredom. But the problem with many bad workers is they don't know how bad they are. What's the best way to critique them—nicely?

Many reviews suffer from a "rater bias" that renders them unfair, inaccurate, or both. Employers tend to hire people they expect to like. They expect to like people who are similar. And they're more likely to rate people higher if they hired them. As a result, people whose personalities and backgrounds are different from the boss tend to get lower ratings, says Jeffrey Pfeffer, not just because of gender, racial, or personality biases at the performance-review level, but because of gender, racial, and personality differences at the hiring level. It's just like Sin Yu warned us: Too many imperial raters are still mistaking "likes and dislikes" for "merit."

The best way to correct this is to involve a diverse group of people in the evaluation process to water down individual bias, as Jeffrey Pfeffer wrote in Bloomberg Businessweek. One-on-one evaluations can feel personal. Groups critiquing groups isn't just more constructive; but also, it's a realistic way to evaluate systems and workflow, which are often as important as individual merit in larger organizations. Pfeffor writes:

As W. Edwards Deming, the father of the quality movement, taught a long time ago, company performance often results more from variations in systems than from the individuals doing the work. One of the reasons Toyota Motor (TM) has been so successful for decades—even as leaders have come and gone and the automobile market has changed—is that the fundamentals of the Toyota management system, which emphasizes quality, continuous improvement, and standardized tasks, provide the advantage. 

A Performance Review for Performance Reviews

It's bad enough that annual evaluations are outdated. It's problematic that they're susceptible to a plague of biases. It's worse that they tend to be pathetic motivators. But the coup de grace is that they're not even good at identifying the thing they're meant to identify: performance.

Research from Corporate Executive Board found that two-thirds of employees receiving the highest scores in a typical performance management system "are not actually the organization’s highest performers," Jena McGregor reported for the Washington Post. Nearly 90 percent of companies surveyed said they have or hope to make changes to their evaluation process in the next year.

It's worth asking whether a process so flawed is worth saving.

I should stop short of answering that question for America's tens of millions of companies, who certainly know more about their employees' motivations than I do. But if each employee of a company deserves a rigorous evaluation to determine his or her performance and place in the company, the exhaustive evaluation process, itself, deserves a similarly rigorous performance review.

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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