A new theme for business magazines is: Should companies drop their performance review programs? The bottom line is usually NO, don’t drop your performance review. Our suggestion is “Don’t throw the baby out with the bathwater!” This is one of the main tools for determining who is performing and who is not. 99% of companies indicate that they want to Pay-for-Performance. The problems with today’s performance reviews are multi-faceted: (1) they are considered an imposition on manager’s time; (2) managers are not adequately trained; (3) most are done once a year, which is too infrequently; (4) the performance results are often ignored when providing HR actions; and (5) the reviews are generally too complicated and confusing.
Our advice is to keep using performance reviews, but improve the procedure, train employees and managers in their usage, and use them consistently as tools for rewarding great contributions, while improving less than satisfactory performance.