According to The Wall Street Journal:
Clearly, what the majority of companies are doing to rank employee performance is not working. To really have an effective performance strategy, there are four useless features of traditional performance appraisals that must be ditched or amended.
The Yearly Review
If you’re not working in regular feedback into your company culture, you’re doing it wrong. Imagine for a second a mother only gives feedback to her children (or spouse!) once a year — you need to be working harder in your math class, you should help more with the chores. How effective would that be? Why are we still doing it this way in companies?
A feedback-rich culture can address problem behaviors or reward exceptional performance as it happens. This can remove some resentment for letting an easily fixed issue linger for months and eliminate surprises.
The Five-Point System
Reducing a year’s worth of work to a value from one to five is degrading, for one, and nearly impossible, for two. In fact, according to Forbes, this rating system encourages a fight-or-flight response — meaning most employees will get defensive. This is the exact opposite response you want in reviewing performance.
In addition, Forbes has discussed how the one-through-five ranking incentivizes high performers to leave the company. Middle-of-the-pack performers, meanwhile, are not incentivized to work harder based on the Bell Curve bonus structure. Again, a culture focused on feedback and employee recognition can take employee performance out of these stifling number ranks.
The One-Sided Approach
Traditional reviews are not only one-sided — manager to employee — but from only one person. This can result in a highly subjective review and, perhaps even worse, employee resentment. In the modern office, some managers do not even work daily with every employee. For that reason, many companies are trading the one-sided approach for a team-based feedback system.
According to LinkedIn, this idea is called "social performance management," and it uses an employee’s direct contacts and teammates to review performance. This way, not only are the appraisals two-sided, but they also come from several different people to avoid bias.
The One-Size-Fits-All Rule
No two employees operate the exact same way. And so to judge performance on the exact same scale seems both inefficient and unfair. Often in this system, pleasing your manager becomes more important than using your skills to perform well. Even further, how can a sales employee be ranked in the exact same rubric as an editor, for example?
As more and more companies are hiring employees based on their cultural fit and increasing on-the-job training, it becomes far more apparent that traditional photocopied checklists for each employee are becoming obsolete. Instead, focus on individual employee goals.
As the office environment changes, so do employees — and so too must change the way we review their performance. Building a feedback-rich culture can eliminate some of the most outdated aspects of performance reviews.