Many Companies Are Re-evaluating The Employee Performance Evaluation At many companies, annual reviews are being transformed as the nature of work changes. And instead of ranking their employees, firms are turning to more frequent, less formal evaluations.
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Yay, It's Time For My Performance Review! (Said No One Ever)

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Yay, It's Time For My Performance Review! (Said No One Ever)

Yay, It's Time For My Performance Review! (Said No One Ever)

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ROBERT SIEGEL, HOST:

Now is the season for performance reviews at many companies. It's not something that most employees or managers look forward to. NPR's Yuki Noguchi reports on the search for a better way to evaluate performance.

YUKI NOGUCHI, BYLINE: When it comes to performance reviews, there's one thing almost every worker and company agree on - they don't work. Brian Kropp heads the human resources practice for CEB, a research consultancy. His surveys show only 4 percent of HR managers think their system of assessing employees works, and nearly all say theirs need an overhaul. It's no wonder, Kropp says, since the way we work has changed so much.

BRIAN KROPP: A lot of our performance management systems don't do a really good job at capturing ideas or insights. They capture hours or things that come off an assembly line, and the world just doesn't work that way anymore.

NOGUCHI: People work more in teams or have different supervisors on different projects. Business also moves faster, which is why, Kropp says, many employers dropped annual numerical rankings in favor of more frequent qualitative feedback.

KROPP: But what we're finding is that companies that have made that shift after they've gone through a set of performance review cycles - the feedback that employees get from their managers has gotten dramatically worse. The perceptions of fairness from a rewards perspective have gotten much worse.

NOGUCHI: Not surprisingly, low performers were happy to get rid of rankings, even if most companies no longer automatically fire the worst performers. Top performers no longer felt rewarded. So what to do? That's the question, says talent management consultant Kim Ruyle.

KIM RUYLE: I think we're right in the midst of a pretty significant transformation in the business landscape around performance management.

NOGUCHI: Ruyle says many systems fail because they start with the wrong psychology. Giving and getting grades is inherently threatening, activating what he calls threat networks in people's brains. Am I in trouble? Why don't they like me? Feeling this sort of anxiety makes them focus on fear and humiliation rather than actual performance improvement.

RUYLE: What does that mean for my status in the organization and how I'm viewed by my superiors and my peers and so forth? So, again, all kinds of threats come into play and avoidance behaviors because of that.

NOGUCHI: The challenge is designing a system that doesn't do that. Gerald Ledford is senior researcher at the Center for Effective Organizations, which studies how to create, well, effective organizations. He says the vast majority of companies that no longer rank their employees replace that with more frequent, less formal evaluations.

GERALD LEDFORD: If you're meeting with somebody monthly, you're not going through a complicated rating process every time. And they tend to be less threatening because it's a more regular kind of an event.

NOGUCHI: Ledford says giving more feedback comes with challenges. It demands more time of managers. It can also go too far, making workers feel that everything they say and do is being closely monitored. Ideally, workers should not be too focused on getting high marks on evaluations. They should feel free to experiment and try new things. Bradley Staats is a business professor at the University of North Carolina.

BRADLEY STAATS: If we're succeeding at every single thing that we try, almost for sure it means we're not trying risky enough activities, that we need some amount of failure.

NOGUCHI: To avoid that, Staats says, businesses need to gather data that look at a worker's process rather than just outcomes.

STAATS: A end-of-project success or failure is an incomplete view that - we need to know, if it failed, well, why did it fail? You know, what was the learning that came out of it that we might use?

NOGUCHI: Even if performance evaluation is effective, he says, it will likely never be popular with everyone. It is, after all, an evaluation.

STAATS: People don't like negative feedback.

NOGUCHI: Yuki Noguchi, NPR News, Washington.

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