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The Foolishness of Employee Ratings and Annual Reviews

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Imagine that every year, your closest friend gave you a letter grade on the quality of your friendship, and told you how many rungs you were removed from “best friend” status.

Sounds pretty awful, eh?

And yet, that’s basically what companies do when they rank their employees or conduct annual reviews. They are treating people like inventory, deciding which is good enough to keep, which is excellent enough to offer at a higher price, and which needs to be scrapped.

Ratings

© Flickr user jvleis

It might sound like sacrilege to question employee rating and annual reviews, but one of the largest companies in the world is doing exactly that. In a video interview for LinkedIn, GE CEO Jeff Immelt explains why his company General Electric is giving up on the practice.

It makes a lot more sense to provide continuous feedback instead of waiting for an anniversary to roll around. Imagine if a champion runner or a boxer only heard from his coach once a year about changes they could make to be more competitive. We need to hear what we are doing well and what we could do better at frequent opportunities.

But more importantly, what makes people valuable is that they are not predictable. Innovation comes not from doing the same thing, but from creativity and making mistakes.

Generally speaking, structured reviews create an adversarial relationship rather than a positive one, and don’t benefit employees.

And it’s not as if this is new. Microsoft abandoned their stacked ranking system years ago. From 2009 to 2011, more than two-thirds of companies dumped this approach. Lots of organizations are realizing that treating employees like parts on the assembly line is downright horrible. Not only does it fail to work, it drives people away.

The Not-At-All Secret of Human Psychology

People in your company are, well, people. We’ve already covered the awesomely useful knowledge available from the field of psychology. If you have people working in teams, it’s practically criminal to do so without understanding the concept of social loafing. Before you start marketing your product, make sure you understand the decoy effect. And if you’re thinking of giving out bonuses to get people to work harder, maybe read one of the most important papers, ever.

How People Feel About Being Ranked and Evaluated

They can’t stand it. With regard to performance reviews in particular, the data is grim. About 45% say the feedback they receive is a fair and accurate representation of their performance, and only 25% report they are given specific examples of their work to support the feedback they receive. That’s like an athlete who thinks the ref is wrong more than half of the time, and their coach is yelling at them without providing any suggestions three-fourths of the time.

What You Should Do Instead: Seek Feedback on Feedback Mechanisms

Start with a question for your team members: “How do you want me to relay to you my opinions on how you are doing?”

They are going to give you an answer. Some common responses are as follows:

“Let me know if I make a mistake so I can correct it. Otherwise, I’ll keep plugging along.”

“Maybe we can meet once a week to check in or so? For 10-15 minutes at the most?”

“Since I’m new here, I’d love to know if I’m doing things the right way or the wrong way, so let me know either way!

All of these are perfectly valid answers. For our team, we’ve established pretty clearly that no news is good news. But that’s because of the culture of the organization and the relationship between the parties involved.

For you, talk with your employees, vendors, and contractors about how they want to receive feedback. Don’t put them in an annual review process or a stacked ranking! Instead, find out what they need and figure out if that’s something it makes sense to provide.

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Robby Slaughter
Robby Slaughter is a workflow and productivity expert. He is a nationally known speaker on topics related to personal productivity, corporate efficiency and employee engagement. Robby is the founder of AccelaWork, a company which provides speakers and consultants to a wide variety of organizations, including Fortune 500 companies, regional non-profits, small businesses and individual entrepreneurs. Robby has written numerous articles for national magazines and has over one hundred published pieces. He is also the author of several books, including Failure: The Secret to Success. He has also been interviewed by international news outlets including the Wall Street Journal. Robby’s newest book is The Battle For Your Email Inbox.
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