Performance Evaluation Pitfalls To Avoid

Signs your performance evaluation process might be broken\

One of the more painstaking and time-consuming end-of-year processes is the performance evaluation. The entire process, from developing the performance evaluation to filing a finalized review, can take months to complete.

(For an in-depth look at how convoluted the performance evaluation process can be, check out our webinar, “Performance Appraisals: A Broken Process”.)

In addition to being a lengthy process, performance evaluation is also one of the more costly employee processes - the average organizational cost of a performance appraisal is $2,500 per employee, per year.

With so much time, money and energy being spent on performance appraisals each year, it’s somewhat surprising to learn that the vast majority of workers, across all levels of an organization, place little to no value on the way their organization evaluates employee performance.

Check out these employee performance evaluation statistics:

• 66% of employees say their employer’s performance evaluation process makes negatively impacts their productivity. (CEB)
• 90% of HR professionals don’t believe their organization’s current performance reviews provide relevant or accurate information about performance. (CEB)
• 94% of managers believe the way their company manages performance process isn’t worth the amount of time they spend on it. (Forbes)

So why do so many people place so little value in their current performance review process?

5 pitfalls of the traditional employee performance evaluation

1. Rater bias.
   Managers should actively attempt to identify and overcome any biases they may have that could impact their evaluation of an employee’s performance. A bias can be based on a number of factors (race, sex, age, religion, ethnicity, personality, etc.) not directly related to job performance that may impact how a manager rates a particular employee. There are also several biases that are specific to performance reviews, like the recency error, which occurs when a manager or rater weighs a recent event (such as a large sale) more heavily than past events. Biases like the recency error skew the review (either positively or negatively) and result in less accurate evaluations of performance.
2. Rating inflation.
   Sometimes managers choose to give undeserving employees glowing performance appraisals because they are concerned with how the appraisal will affect their relationship with the employee, or because they are concerned a low rating will negatively affect their own aspirations. These inflated ratings give low-performing employees a false sense of security, and can even be used as evidence against the employer in the event the employee chooses to sue for wrongful termination.
3. Inconsistent scoring and ratings.
   Occasionally managers will rate an employee highly, but then add comments that describe the employee as low performing, or vice-versa. Managers may also choose to simply rate an employee as “average” across the board to avoid taking the time to go through each assessment factor. This inconsistent scoring style, usually a result of failing to understand the rating system, hurts the credibility of the review process and can also be used as evidence in possible litigation.
4. Rating employees on factors not related to job performance or specific job duties.
   Many of the factors traditional performance appraisals measure aren’t actually linked to the quality, financial value or volume of an employee’s work. Instead, they ask managers to rate employees on behavioral traits, like willingness to take on new projects, how ambitious they are, etc., factors that aren’t necessarily related to output or employee productivity. Alternatively, some appraisals weigh each assessment factor equally. But not every assessment factor is equally as important to every job. It’s very important for a customer service representative, for instance, to have great communication skills, but perhaps less important for them to display creative thinking skills.
5. An overall lack of feedback/comments.
   The entire point of a performance evaluation is to provide feedback on what an employee is doing well and how he or she needs to improve. Not providing an explanation of the rating an employee receives or leaving misleading/generic comments essentially negates any value the performance appraisal may have had, and will leave employees feeling confused and unappreciated. If you’re not going to use the performance review as an opportunity to openly discuss performance and goals, then you might as well not conduct one at all.

So if performance reviews have so many problems, what’s the value in having them at all?

The value of having a performance evaluation process

Even though the traditional methods used to measure performance are flawed, there is definitely value in evaluating employee performance. Performance evaluations have several important uses, serving as an opportunity for managers to let employees know how they are doing, identify areas for improvement and recognize high-performing employees. Performance reviews are also often used to determine compensation increases.

Perhaps more importantly, documented performance evaluations can be used to justify future personnel decisions. As evidenced by the increasing number of wrongful termination and discrimination lawsuits in recent years, it’s become even more important for employers to maintain a consistent and complete record of poor performance and infractions that clearly documents the reasoning behind demotions, disciplinary actions, terminations, etc. Not maintaining this record can leave employers open to potential legal action.

Unfortunately, the overwhelming majority of formal performance appraisals conducted each year are largely ceremonial, and don’t even accurately measure employee performance. What’s more, these appraisals, when conducted by managers without proper training, can actually be used against an employer in the event that a disgruntled employee decides to sue the company for wrongful termination or discrimination. Employers should make every effort to make sure each of their managers fully understand and follow the organization’s performance management process, and that the policy is communicated to every employee in order to avoid any potential noncompliance or liability issues.