The Problem with Performance Review
The practice of performance review has been around for more than a century. Although the practice didn’t become mainstream until the 1950s, the primary function of performance appraisals was to provide a process for organisations to rate the effectiveness of their employees. The problem is most organisations don’t do them very well. In 1972, legendary organisational behaviour researcher Douglas McGregor published an article in Harvard Business Review titled “An Uneasy Look at Performance Appraisal” in which he outlined the pitfalls of traditional performance review.
According to the Society for Human Resource Management, nine out of ten companies reported using annual or semi-annual performance reviews—but only three out of ten believed they conducted them well. In a study published in Compensation and Benefits Review, the authors, Edward Lawler et al., state that performance appraisals are one of the most frequently criticised talent management practices. Research by the Conference Executive Board (CEB) indicates that 90 percent of managers are dissatisfied with how their company conducts annual performance reviews. These statistics are a key reason organisations like GE, Adobe, Gap, Accenture, Deloitte, and others are reportedly “abandoning” their current performance review processes.