Performance Reviews Are a Thing of the Past — Try Recognition Instead

Much to everyone’s relief, 2020 is now a thing of the past. With 2021 in full swing, now is an optimal time to review your company’s processes and identify areas for improvement. We all want to leave 2020 behind, and as you look for processes to either improve or eliminate entirely, consider one of the most controversial and debated workplace processes: performance reviews.

Performance reviews are becoming less and less important, especially because of COVID-19. With more employees than ever working remotely, companies are seeing a stronger need for recognition in the workplace. This isn’t to say that constructive feedback is a bad thing — rather, companies should reconsider their approach to delivering constructive feedback in a formal performance review. The nature of the workforce is changing rapidly, and the way we deliver feedback should too.

In this article, we’ll explore what a standard performance review is, why it doesn’t work, and offer tips on how to transition away from them. We’ll even offer advice on the best alternative ways to deliver constructive feedback using the same strategies you use to recognize.

What are performance reviews, and how are they typically used?

To understand why performance reviews don’t work, let’s first discuss what they are. Performance reviews are formal and usually occur biannually or annually. A typical employee performance review will cover whether goals have been met, not met, or exceeded; feedback on how your employee works with others; and other suggestions for improvement. For an in-depth exploration of performance reviews, check out this post on our blog.

If you would rather get a quick overview of how a typical performance review works, here’s a quick recap:

  1. To understand why performance reviews don't work, we must first understand exactly what they are and how they work.
    To understand why performance reviews don’t work, we must first understand exactly what they are and how they work.

    A survey is sent to the employee and their colleagues 

  2. Questions cover employee’s strengths and weaknesses, job performance, and areas for improvement
  3. The feedback is aggregated into groups by themes and commonalities 
  4. The constructive feedback is summarized in lieu of reading it verbatim
  5. Feedback is delivered during a 1:1 meeting with the employee and their supervisor

Many companies couple performance reviews with compensation reviews as well, which can muddy the process even further. This practice began in the 1970s as inflation rates rose and companies felt more pressure to set salaries more objectively based on an employee’s contribution. Naturally, performance reviews became a part of the process, but in today’s cultural climate, they are not the most effective way to incentivize employees.

Why don’t performance reviews work?

Performance reviews actually originated from the US military during WWI in the form of a merit-rating system to flag and dismiss poor performers. By the 1940s, approximately 60% of companies were using performance reviews to document employee output and allocate rewards. This was at a time where human capital was plentiful, and organizations like the military were more focused on who to let go rather than who to retain. In this historical and cultural context, performance reviews worked fairly well. 

Only 14% of employees agree that performance reviews incentivize them to do a better job.
Only 14% of employees agree that performance reviews incentivize them to do a better job.

Some may argue that they’ve endured the test of time because they work, however, a recent study by Gallup found that only 14% of employees strongly agree that their performance reviews inspire them to improve. In fact, performance reviews tend to be demoralizing for employees and can sometimes demotivate your workforce. The reason? We no longer live in a world where human capital is abundant. Turnover is higher than ever, and the focus has now shifted to employee retention, not evaluating who to dismiss.

The evidence is in the data: A 2012 report by Aguinis and co-author Ernest O’Boyle Jr gathered more than 23,000 employee ratings from 40 companies and found no sign that ratings had any effect on profits or losses. While 91% of employers conducted formal performance reviews in 2017 this number decreased from 94% in 2016, signifying that the popularity of performance reviews is declining. Furthermore, 95% of managers are dissatisfied with formal performance reviews, and 90% of HR professionals think performance reviews are inaccurate. These are just a few studies that have been published in the last few years that demonstrate that the workplace attitude toward performance reviews has changed, and along with it, their effectiveness.

Fortune 500 companies are listening, too. By the end of 2015, at least 30 of the Fortune 500 companies had ditched performance evaluations altogether. In fact, Accenture, a company with 330,000 employees, completely eliminated performance reviews and implemented a more fluid system in which employees receive timely feedback from their managers on an ongoing basis following assignments. When interviewed about the switch, Accenture said that their decision to transition was “based in their own internal research and outside studies.”

So, what’s the alternative to performance reviews?

You may be thinking, “Performance reviews are the only way I deliver employee feedback. What should I do instead?” One way to deliver effective constructive feedback is to treat it like recognition. This isn’t to say that you need to sugarcoat constructive feedback or eliminate it altogether — rather, your constructive feedback should be timely, specific, and actionable, just like recognition. Deliver feedback in 1:1 meetings between you and your employee or via video chat if meeting in person isn’t possible. 

There are many alternatives to performance reviews.
There are many alternatives to performance reviews that can provide constructive feedback and incentivize employees.

Let’s dive deeper into how you can use the same strategies you use for recognition to deliver constructive feedback as an alternative to performance reviews.

3 Recognition-Driven Tips for Delivering Effective Employee Feedback

1. Deliver Feedback as Often as You Recognize

Today’s workforce is focused on continuous improvement and employee retention. The goal of delivering feedback should be to improve your employees’ performance, not evaluating whether they should be dismissed from your company. With this in mind, approach delivering feedback the same way you recognize: frequently instead of in monthly, quarterly or annual meetings. In fact, consider delivering feedback as often as you recognize. Try delivering feedback in weekly 1:1 meetings with your employees along with recognition.

Your company's core values should be present with every piece of constructive feedback you deliver.
Your company’s core values should be present with every piece of constructive feedback you deliver.

2. Align Feedback With Your Company Core Values

Your constructive feedback should be aligned with your company’s core values. When considering what feedback to deliver to an employee, always ask how this feedback ties back to your core values. For example, if one of your values is “Put the Customer First” and you see customer service fall by the wayside, be sure to prioritize this as a talking point in your next 1:1 meeting. Additionally, if you see an employee demonstrating one core value exceptionally but ignoring another, bring this to their attention. Suggest that they ensure their focus is allocated toward all of your core values to ensure they are exemplifying what your company stands for every day.

3. Deliver Specific and Actionable Constructive Feedback

Like recognition, constructive feedback needs to be specific so an employee knows exactly how to improve. Vague feedback does little to help employees — what they really need to know is precisely how to improve and what drove this feedback in the first place. Constructive feedback should also cover similar topics to recognition: how well your employee aligns with your company core values, the quality of their work, criteria for career advancement, efficiency, and teamwork. All of these topics can be broad, so be sure to hone in on where exactly the employee can improve.

What does recognition do that performance reviews cannot?

Unlike performance reviews, rewards and recognition provide real incentivization tools. By delivering both positive and constructive feedback frequently instead of during scheduled performance reviews, employees tend to feel that management is continually invested in their success, spurring productivity. 

Recognition provides key tools that performance reviews cannot.
Recognition provides key tools that performance reviews cannot.

This is especially important during a time where COVID-19 has forced many businesses to abruptly transition to remote work. Employees are, as a result, feeling less connected to their job and more uncertain of what the future holds. Regular recognition and feedback helps counteract this increased feeling of isolation by reassuring employees that management is still invested in their careers and futures.

When providing positive feedback, recognition delivers a host of benefits, many of them data-driven. A rewards and recognition platform captures data on how many recognitions employees receive, how many they have sent, and what they have been recognized for, which can guide managers in putting together constructive feedback. If you notice an employee has not been recognized for a specific core value or behavior, it might be time to encourage them to shift their attention to it in the coming weeks or months.

What’s next?

Even before the onset of COVID-19, performance reviews were on the decline. Many companies had already eliminated performance reviews, and the events of 2020 only accelerated the process. COVID-19 has transformed the way we do business, from our day-to-day work lives to the way we conduct performance reviews. Now is the time to rethink your approach to employee feedback, and your employee recognition program can become an integral part of your strategy to engage employees. Instead of the traditional performance review, consider recognition best practices and apply them to the way you provide constructive feedback. Use these suggestions to build a culture of recognition at your company, even when employees are remote, and strengthen morale coming out of a rough year.

Erin Nelson is a Digital Marketing Manager at Fond with over six years of B2B SaaS marketing experience. Erin has authored dozens of articles on employee rewards and recognition and frequently researches new trends in R&R. In their spare time, you can find them playing music, reading about socioeconomic and gender-based politics, and listening to true crime podcasts.