Faulty Performance Review Processeses Cost Companies as Much as $35M Annually
Organizations Should Focus on Conversations, not Scores to Improve Productivity and Motivate Employees, According to CEB

ARLINGTON, Va., Aug. 26, 2015 /PRNewswire/ -- While the annual review process is intended to help employees improve their output, the irony is that performance reviews today have little to do with – and even less impact on – corporate performance. According to CEB (NYSE: CEB) a best practice insight and technology company, faulty performance review processes can cost as much as $35M in lost productivity for a company with 10,000 employees. The biggest challenge lies with scores and rankings, which when used to motivate employees, typically backfire.

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Companies have become increasingly focused on evaluating performance using quantitative measurements that look only at the past, and haven't invested enough in measurements that spur future performance. Six percent of the Fortune 500, including Microsoft, Adobe, Cargill, Accenture and GE have re-engineered how they review individual performance to address this issue, eliminating what had become irrelevant tools in their engagement toolkits.

"Rankings and scores were popular in the 1990s because they supported a tougher, more pervasive 'up or out' corporate mentality," said Brian Kropp, HR practice leader, CEB. "Today, businesses are embracing cultures that foster greater collaboration and communication. In this new work environment, companies need to think about the implications scores and rankings have on their workforce as many view them as disruptive and create a barrier between employees and managers.

"Companies that want to realize value from their performance appraisal investments should make a more concerted effort to create a climate where performance feedback isn't given once a year, it's constant," Kropp added.

To improve performance review outcomes and increase productivity and collaboration in the workplace, companies should:

  • Change the nature of performance conversations – stop reserving performance assessments for scheduled times or check points. Instead, teach managers how to give feedback on an ongoing basis to improve employee productivity and reinforce goals and expectations.
  • Make review conversations about the future - use examples of past performance to help employees understand how to improve their productivity moving forward, rather than looking backwards to highlight successes or failures over the past year.
  • Collect a holistic account of employee performance – gather feedback from a variety of sources (peers, co-workers, customers) to get a true picture of an employee's contributions. This is especially important now that employees collaborate more often with more people and the depth of their contributions may not be as readily apparent.

To learn more about how to improve the performance review process, visit CEB.

About CEB Inc.
CEB is a best practice insight and technology company. In partnership with leading organizations around the globe, we develop innovative solutions to drive corporate performance. CEB equips leaders at more than 10,000 companies with the intelligence to effectively manage talent, customers, and operations. CEB is a trusted partner to 90% of the Fortune 500, nearly 75% of the Dow Jones Asian Titans, and more than 85% of the FTSE 100. More at cebglobal.com.

 

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For further information: Wunmi Bamiduro, (571) 303-4573, wbamiduro@cebglobal.com