Few institutional practices are as old, or have been hated as long, as the performance review. Job ratings were used (and criticized) in China as early as the third century; in the early eighteen-hundreds, an owner of cotton mills in Scotland hung color-coded wooden blocks over employees’ workstations to indicate their merit. The bureaucratic corporate culture of the nineteen-hundreds—the century of cubicles, assembly lines, and Six Sigma—enshrined performance reviews in corporate handbooks. With its numerical scales and reinforcement of rigid business hierarchies, the annual evaluation would seem uniquely designed for the postmodern age.
Lately, though, the annual performance review has been falling out of favor in some quarters. Microsoft and Gap are among several companies that have reformed their evaluation processes in recent years. On Tuesday, the consulting firm Accenture, an emblem of traditional corporate culture if ever there was one, announced that it is getting rid of annual evaluations for its three hundred and thirty thousand employees, replacing the process with a system where managers will give feedback on a more regular basis. Accenture’s C.E.O., Pierre Nanterme, told the Washington Post that the existing evaluations are cumbersome and expensive. Plus, he added, “the outcome is not great.”
Nanterme’s observation—that the cost of performance evaluations, presumably both financial and psychic, is hardly worth the benefit—echoes complaints made by other managers, not to mention employees, for at least the past several decades, but it has only relatively recently been reinforced by research. In 2013, psychologists at Kansas State University and other institutions studied how different kinds of people react to negative feedback. They invited more than two hundred employees of a university to rate how they felt about a recent performance evaluation, and asked questions meant to categorize the employees based on how they approach personal goals. The researchers figured that people who seek out learning opportunities would react better than those who avoid situations in which they might fail. This was true—but even the avid learners disliked performance reviews, they just disliked them less. (The Post’s headline about the research described it succinctly: “Study finds that basically every single person hates performance reviews.”) An earlier study, published in 1996, found that while job appraisals generally improved people’s performance, they had a negative impact on performance more than a third of the time, notably in cases where the assessments focussed on individuals rather than on their performance at particular tasks.
In an e-mail, Kevin Murphy, a scientist at Colorado State University and an expert on performance appraisals, pointed out some other issues: Managers have incentives to inflate appraisals; even accurate feedback can feel biased and unfair, making people less motivated and hurting relationships between supervisors and subordinates; and organizations don’t do a good job of rewarding good evaluators and sanctioning bad ones. “As a result, annual appraisals end up as a source of anxiety and annoyance rather than a source of useful information,” Murphy wrote.
Confronted with all of these weaknesses in the performance evaluation, some have pushed for their outright elimination. “I’d like to lead the million-person march on Washington to get rid of performance reviews,” Samuel A. Culbert, a professor at the U.C.L.A. Anderson School of Management and the author of a book called, naturally, “Get Rid of the Performance Review!,” told me over the phone. He said that he simply doesn’t think they can be made to be effective in any form, and that Accenture’s changes sound, to him, somewhat unimpressive.
Accenture’s approach recognizes the need for some sort of method for evaluating performance, however, just one that is less costly and more effective. Other companies have come to similar conclusions. In 2012, Adobe replaced its evaluations, after its senior vice-president of people and places, Donna Morris, concluded that employees hated them and they weren’t very useful. Under the old system, managers focussed on the most recent developments instead of looking at the entire year; they fixated on the past instead of considering what employees should do going forward; and, most important, they came across as antagonistic. Instead, Morris implemented a more informal “check-in” process that takes place throughout the year, with employees receiving feedback on what they’re working on at any given moment.
A recent performance-evaluation overhaul at Deloitte, the accounting firm, made the cover of the Harvard Business Review, when the firm replaced a laborious annual process—it included “consensus meetings,” where people got together and compared employees to one another—with the requirement that, after every project, managers respond to four straightforward statements. On a five-point scale, Deloitte managers write down how strongly they agree with two assertions: “Given what I know of this person’s performance, and if it were my money, I would award this person the highest possible compensation increase and bonus;” and “Given what I know of this person’s performance, I would always want him or her on my team.” And they answer yes or no to two more statements: “This person is at risk for low performance,” and “This person is ready for promotion today.” The answers are used not only to make decisions about who should be promoted or how much she should be paid, but to influence how the company helps promising employees advance and helps troubled ones get back on track. As some of the people involved in Deloitte’s ratings redesign put it: “In effect, we are asking our team leaders what they would do with each team member rather than what they think of that individual.”
The new systems at companies like Accenture, Deloitte, and Adobe certainly seem friendlier and more streamlined than the past approaches. Lately, though, companies and researchers have drawn attention to another problem with performance reviews—one that these companies’ new practices may not be addressing and could, in fact, be exacerbating. Data shows that all kinds of personal quirks and biases, both conscious and not, influence our appraisals of other people. (If you’re not sure that you believe in unconscious bias or think you’re immune, try these tests of your own racial and gender prejudices.) These prejudices, which are sometimes collectively referred to as “the idiosyncratic rater effect,” influence how managers think about—and describe—their employees. Studies suggest that more than half of a given performance rating has to do with the traits of the person conducting the evaluation, not of the person being rated.
Anyone who has been given a negative performance review by a mean-spirited or incompetent boss will be familiar with this effect, but its implications go beyond individual dispiritedness. As James Surowiecki wrote last year, in a piece about the gender imbalance in Silicon Valley, “In a recent study of almost two hundred and fifty performance reviews, the tech entrepreneur Kieran Snyder found that three-quarters of the women were criticized for their personalities—with words like ‘abrasive’—while only two of the men were.” After Ellen Pao, a former junior partner at the venture-capital firm Kleiner Perkins Caufield & Byers, sued the firm for discrimination, in 2012, it emerged that her performance reviews at the firm had described her as having “sharp elbows,” and being “territorial” and “not a team player.” (Pao lost the case, but the evaluations reflected poorly on Kleiner Perkins.)
Organizations, Murphy told me, need to make sure their performance-evaluation process attempts to minimize bias—which often involves collecting more, not less, information and documentation, and having more, not fewer, people weigh in on an employee—in other words, “the opposite of what organizations like Accenture appear to be doing,” he told me. “The frustration with performance appraisal is certainly understandable,” Murphy said, “but if alternatives become more subjective and less attention is given to reducing bias, there is potential for serious problems down the road.”
