Performance Reviews: Everything is wrong with it

Almost every organisation that I know of has a performance review cycle for its employees. Employee has to wait for six months to an year to get that performance review and the rewards/compensations are revised on the basis of it.

Performance review is flawed in its construct, more so in the sense of its execution. Below is the list that of fundamental problems that I have found which makes it not useful and given the way world is today, it is far outdated.

  1. Its almost always top-down
    Most organisations have performance reviews cycle as top-down i.e., managers giving feedbacks to their team members. This one sided nature of the review is the worst mistake an organisation can do, where the top tier remains unchecked of their performances while the employees suffer.

    Few companies have both top-down and down-up review system. Even there an employee has more chances to lose their credibility or worse remain unheard. This is because managers are mostly manipulative and truth be spoken, wield far greater authority(power) than the employee.

  2. Performance review suffers from recency bias
    This is a proven fact that most of our actions are based on recent events. In fact, if we dig into our memory majority of the events are recent. The ones from the history for example 6 or 12 or 24 months would mostly be about the peak times or the worst of the times. Everything else is a blur.

    This clearly reflects in the performance reviews. This has happened to me as well, I have done it. Reviews should be regular, combined with progress tracking for the person. Organisations have always focused on the efficiency but I have not yet seen a single instance where an employee can see where they stand. Objectivity is usually lost.

  3. There is no privacy
    Feedback between two people should be kept in secrecy. It is not important for the organisation to know the feedback received by the person more than person knowing what is required out of them. There should be clear metrics to look at but most reviews are opinion, which means essentially the person who has greater authority will have their way instead of actually solving the problem.

    Communication is the biggest hinderance in achieving anything. Considering this, one can imagine what reviews usually have. Unless the manager is Shakespeare, the chances are very high the review is not what it is supposed to be, helpful. Even the Shakespeare will create the confusion. There is certain tone and context to reviews which a person other than the receiver and giver will never be able to comprehend completely. Sharing that with a 3rd person is waiting for the disaster to happen.

  4. Too long a wait for feedback
    Looking back at things that were troublesome could be perceived as easy today, diminishing the effort put in by the person. More often than not, sour memories clog the mind than the good ones. We by nature tend to focus on mistakes than the good which adds to already listed problems.

    On the other hand, it is not justified for the employee. Things that a person can improve on today must not wait for six month. That is ridiculous. This is wasting both employee’s and organisation’s time, all in the name of process. Processes are useless if they tend not to solve the problem and dangerous if they have adverse effects like in this case.

  5. It is compensation or rewards review
    Worst of the problems with performance review is that it is meant to tell a person that you are not good and in some cases they are out of job. Usually the performance review is abused and used as a tool to decide on compensation or promotion. Performance review should be paired with a teaching/guidance program which helps the employee. Lot of companies lack any sort of program which can help their employees.

    Although this can be argued that its not the company’s job to do, then the organisation must also remember that its not employees job to be faithful to them. Relationships can only work if they both parties have win-win situation and not having support or at worst job is not a win for the employee.

What should be done?

One on one is a great way of having the problems resolved. There should be a time allotted to both the parties where one person speaks and the other writes down about themselves. It should be done between both managers and employees and between employees, again keeping it in secrecy. Mostly an employee is always aware of their performance. What peers and managers can do is, guide them to find the solution for their problems. The points discussed should not be held against the person at later point in life. The goal of this is to identify what the person did better and what they can do better.

For the company to decide if a person is compatible with the job they are required to do, there should be a clear metric which an employee can look at in real-time. Here, an employee must understand that although hard work is being appreciated but it is tied to results and it must be produced. For organisations, it should help the employees in achieving the results that they intend to as it fundamentally benefits the organisation. That is why everyone is there. Employee must not feel like they are into slavery where they are required to achieve something for salary with no help.

Organisation: Through mental models – Part 1

Organisation through mental models

The basic principle of understanding anything in science is to break it down into smaller pieces of information. To understand what an organisation is, it is required to read the actual definition. Over course of many years researchers have come to this definition:

An organisation is a group of people trying to realise an idea and ensuring good returns for the investors.

There can be infinite type of organisations or ideas or returns for the investor, but this definition covers all. Notice the three things here:

  1. Group of people
  2. Realise an idea
  3. Good returns for the investors

These are the first layer of categories which can be sub-divided into their own categories. Every problem can be traced to one these three ultimately. Is it a people’s problem, is it an idea problem or is it an investment return problem. This was easy as all of the details are already out there but to sub-categorise did take some thinking. There are various ways to find solution to things. I am trying to use mental models that I have learned to find definition of the categories so generic that it covers all the cases and yet doesn’t loose the crux of it.

Group of people

As per definition it only means more than one persons. Apart from that, it does not give any useful information to work on. 5W1H (what, when, where, why, who and how) is the best tool to dig into something unknown for information. In this context of an organisation the only questions that matters is How.

How did the group of people organise themselves? Efficiently.

Although the question can be answered in many ways but the only answer that matter is efficiently. Every other answer would be answering the question technically and specific to a scenario. It is important for a group to be organised efficiently to  maximise the opportunity to realise the idea and returns for investors.

Realise an idea

Going as per the same investigation model, the question that matters here is What.

What did an organisation do to realise the idea? Act.

An idea can be realised in one and only one way, by acting on it. It can be psychological or physical but in no way other than action it can be achieved.

Good returns for the investors

Conventionally, only shareholders are referred to as investors. And if it is seen technically then the employees are also investing their time and skill for the benefit of the organisation and expect fair returns much like the shareholders. An employee is a stakeholder, nonetheless should be considered as an investor. According to the type idea, returns will also be psychological or physical.  The question that should be asked is:

What did the organisation do for good returns? Profit.

Profit is the metric to measure the return to the investors. If it’s psychological how many members does the community have. If it’s physical, how much profit got made off items/subscriptions sold. It is as simple as that.

Conclusion

No matter what an organisation does, how many people it has and where it is located, this is what matters:

Efficiency of the group, actions and profit are the fundamentals of building a successful organisation.

If these are done right, the chances are higher that everything will go in the right direction for the organisation. But it is easier said than done.

Sources:

  1. Organisation
  2. 5W1H