As a leader or manager, you may be put in a position where you need to measure the performance of those in your team or your direct reports. Each company does it their own way but with so many ideas floating around what is the most effective way to measure performance? How can you stay relevant as a leader and organisation in a world where agility and innovation are critical to beating the competition? As a leader, your focus is on the development and success of the people, but how do you foster a growth and development mindset through performance reviews?
The Experience Bias
What is it and why is it dangerous?
The experience bias is a human tendency to believe that our own interpretations of the world constitute the objective truth – anything different is wrong. An isolated picture of what we think is limited to our own perspective no matter how objective we try to be. Everyone sees things differently because everyone is different. This should be something reviewers use to their advantage. Using one person’s perspective to review someone is a bad idea because we will, in the majority of cases, see differences in our own beliefs and perspectives as something that is incorrect. The experience bias can also cause something called the false consensus effect, where we assume more people agree with our perspective and beliefs than is actually true. The problem is this is all unconscious behaviour and in the most part, we don’t even realise we are doing it.
Did you know that studies have indicated that 62% of a reviewers judgement is actually a reflection of the rater themselves and not the person getting reviewed! That’s crazy. This means you may not be promoting the right people and you will also make people feel like they have been unjustly reviewed – because they have… You could end up losing your star players if you don’t make a change and do things the right way.
Reducing the experience bias
The best way to reduce the experience bias is to involve other people in the review process. You want to focus on bringing in different people who think differently to you as the leader or manager. You want as many different perspectives as possible. Do you remember “the dress” social media phenomenon? If not check the details out here. Basically, there was a picture of a dress that looked black and blue to some people and white and gold to others. Some people even saw both (I was one of them). My point is if only one person looked at the image and said it is white and gold and no one else got to voice an opinion we wouldn’t even realise there was another perspective.
In the latest season of Suits (season 8), we see a great example of this #spoileralert. Katrina runs a program that reviews all the employees in the firm and spits out the least efficient. A particular employee ends up at the bottom of the list but it turns out when she looks at him from a different perspective, actually, he is integral to the firm and the team he works in.
Bias a built-in brain function, meaning it can be hedged against, but not erased. I concede that even collective feedback from different perspectives may still fall foul to an element of bias. However, if 6 out of 8 people agree that Dave displays X behaviour then it is quite reasonable that Dave should focus on and address X. It’s the same reason a multiple reporter interviews a range of sources to get the facts of a story.
The benefits of crowd-sourced reviews
The earliest benefit of crowdsourced reviews is that candidates feel more comfortable knowing their good work will be seen. The more perspectives and advocates you have on your side generally translates to greater praise. People can also find comfort that if reviews are crowd-sourced then the entire team will be held accountable in the long run and not just them. Another benefit is that leaders get information that may highlight underperformers that are flying under the radar.
The Annual Review
Annual reviews generally suck. No one likes them. Deloitte reported in this 2015 article that 58% of HR executives considered reviews an ineffective use of supervisors’ time. They are a tonne of paperwork and generally fall under a rigid process. In one company I worked for I had to change my career goals so they would align with the framework the company had defined as to what my goals should be if I want to take the next step. How does that make any sense? It doesn’t when you think that leadership is about understanding the values and goals of your team and helping them achieve those goals. Different people will have different goals.
Reward and punishment
One of the biggest problems with annual reviews is that there is a heavy emphasis on financial reward and punishment. The annual reviews hold people accountable for past behaviour at the expense of improving current performance and building up for the future. In a 2016 article for People + Strategy, a Deloitte manager referred to the annual review process as “an investment of 1.8 million hours across the firm that didn’t fit our business needs anymore.”
What if, instead of an annual review you had regular, informal catchups with your people instead? This is something I try to do on a regular basis and have found to be more effective for performance and development of people. The focus becomes this candid conversation on performance – what went well, what can be improved and what can I do to help. People are more open and honest when you aren’t hanging financial reward or punishment over their heads in a single make or break moment that is the annual review. You are helping to foster a growth and development mindset. Researcher Josh Bersin estimates that about 70% of multinational companies are now moving toward this model, even if they haven’t arrived quite yet.
Scores and rankings
Scores and rankings are a terrible idea. I had it once and I hated it. Not that I ever did bad, in fact, most times I was above average – but even then I felt rubbish for not being at the top. Having a score and ranking made me feel demotivated and hate the review process. Reviews should be about cultivating the development and success of your employees and many studies show that scores and rankings can be detrimental to that. This study shows that people hated numerical scores, in fact, most people would rather be told they were average than have a score of 3 out of 5. People hated forced rankings even more and as Wharton’s Iwan Barankay demonstrated in a field setting, performance actually declined when people were rated relative to others.
Additionally, moving away from a forced ranking system and annual reviews that focus on an individuals accountability make it easier to foster teamwork.
The need for agility
Annual reviews no longer make sense in an agile world. Projects tend to be shorter term, organisational change and transition is more common and pivoting and aligning to technological changes is a requirement to stay competitive. Organisational needs are constantly changing, it doesn’t make sense to hold people accountable for past or even current practices – there is no clear annual business cycle.
End-of-year summaries are still useful to have but you should make it your goal to have frequent conversations with employees using retrospectives (borrowed from Agile). Check out this article if you don’t know what a retrospective is or how to run them effectively. Essentially the main focus of the informal catchups should be these two questions:
- What am I doing that I should keep doing?
- What am I doing that I should change or improve upon?
Additionally, annual goals tend to not make sense on their own due to the dynamic nature of organisations. I tend to have an annual goal but have shorter-term goals that I pivot and change according to my circumstances. To read more about effective goal setting – check this out.
One of the biggest problems with annual reviews is that feedback is reserved for just once a year. How can someone know if they are going in the right direction? What if they have been going in the wrong direction to achieve their goals for a whole year? What a waste of time. The beauty of having a more agile approach where you meet up regularly with employees is that there is immediate feedback. I can know what I am doing well and should continue, as well as what I could improve upon. This can change several times throughout the year as projects change, end and start. I will possibly be doing different things and miss the opportunity to discuss my developmental needs at the time.
Also, if you are including a crowd-sourced feedback process, which I would recommend, then you will have fresh results. As projects change and people move around you won’t necessarily remember how well Bob did on your last project.
Annual reviews and their associated processes don’t align with a dynamic, changing, innovative and competitive organisation. It’s old school. You need to adapt your processes to match the way your organisation is working – otherwise, it just won’t make sense and you will stagnate and lose your competitive advantage. There needs to be a shift of focus into more holistic conversations that are about goals, strengths and development rather than past performance. As a leader, you are trying to improve your team through giving them opportunities to grow, develop and ultimately succeed. Adopting a more agile approach to your annual review process can help you do just that.
Here is a summary of what you need to do and why:
- Remove the experience bias by introducing different perspectives when reviewing someone’s performance
- Remove the focus of reward and punishment of annual reviews by introducing more agile approaches
- Focus on more regular meetings with employees to discuss performance to stay nimble and competitive, focusing on:
- What am I doing that I should keep doing?
- What am I doing that I should change or improve upon?
- Short term goals
- Use annual reviews as more of a summary of performance and a review of long-term goals
- Don’t use scores or forced rankings as this can foster individualistic mindsets rather than teamwork