Performance reviews or appraisals are not a new thing; they have been an established business practice, in their current form, since the 1950,s .
From an HR perspective performance reviews are intended to be about retaining employees. This is important because people are expensive to lose and replace; retaining talented people is a key contributor to organisational bottom lines.
From the employee’s perspective, the performance review is intended to provide an individual with feedback on their contribution, which will allow them to develop their strengths. It is also a key opportunity for managers to explicitly recognise high performing individuals and take steps to ensure that the right conditions are in place to retain those people.
Unfortunately, a recent study suggests that they don’t do that very well .
So what can go wrong?
Conducting a performance review is fraught with dangers for both the appraiser and the appraisee. Key amongst these is a failure to recognise that it is not just an administrative process, nor necessarily about compliance. It is an important negotiation, which in theory results in the appraiser and appraisee committing to changing their behaviour in order to facilitate behavioural change in the appraisee. Such conversations require a great deal of skill to navigate, and can cause great harm if not done well.
And how effective is this pursuit of improving individuals’ performance anyway? Performance Reviews are based on the flawed premise that improving performance of individuals can improve that of the organisation as a whole – it can’t, unless we get lucky and improve the performance of an individual who happens to be the constraint at that particular time.
As Deming rightly pointed out,
"A bad system will defeat a good person every time".
In reality, performance reviews often have the opposite effect to what is desired, damaging the performance of effective individuals rather than improving it. This is especially true of knowledge workers; we know that those who think and create for a living are not motivated by carrot and stick techniques to improve performance .
Highly engaged employees tend to disengage in and around review time, especially if the review harbours some surprise negative feedback, or if the feedback is great but the performance is not rewarded. How many times have you heard someone say “I’m only staying until bonus time, then I’m leaving”?
Since an individual’s line manager often conducts performance reviews, there is great potential for problems arising from the power imbalance between the parties. HR departments tend to try to mitigate this by sending the message that the performance review must be about the behaviour of the individual, not their personality.
The argument goes that it is reasonable to have expectations about someone’s behaviours, since they are under that person’s control. However this is not the case for personality, which is intrinsic to the adult individual . That said, an understanding of the ways in which an individual’s personality might impact their behaviour, for example through the Myers-Briggs Type Indicator , may be of value to the individual.
The reality is that many managers simply don’t have the “soft” skills to provide people with feedback that isn’t (albeit unintentionally) insulting, patronising, plain wrong (a year is a long time to remember things and build a skewed perception of a person or incident), doesn’t smack of “you should try and be more like me”, or a combination of these. 360 reviews can be equally damaging for the same reason – it’s easy to hide behind a criticism in written text that you wouldn’t say to someone’s face, and this can have nasty consequences
Further, feedback on the manager is not built into the process; the review is all about the manager’s view of “the worker” rather than an opportunity for the employee to tell their manager how to be a better one. Even where there is an avenue to provide feedback “upwards”, it may not be provided due to concerns that negative feedback for the manager can be deemed as whining/complaining and thus be damaging to promotion prospects or even the employee’s current role.
This is especially likely when there is no transparency about whether feedback to the manager will be seen by her/his manager. This raises questions about whether managers are actually accountable for their performance as leaders of people or just their department’s results.
Additional problems arise from measuring someone against a set of KPI’s which may be poorly defined, or defined in detail but flawed in what they represent. KPI’s are usually tied to an individual’s activities or goals rather than accomplishments of the team or the organisation. This can lead to siloed behaviour (local optimisation), not to mention a feeling of “how on earth can I affect that KPI on a day-to-day basis?” or “what the hell does that KPI have to do with my performance?” For example, marking someone’s otherwise highly valued contribution down from very high to high, because they failed to submit all their timesheets on time.
Finally, most managers’ dislike conducting appraisals. People naturally do not want to be put into a position which forces them to criticise another individual or to feel they must evaluate their worth to the organisation. This leads to resistance which, combined with poor skills and poor appraisal instruments, results in the organisation receiving poor quality data and consequently not achieving their goal of retaining and developing valuable people.
The society for Human Resources Management  proposes the following as opportunities for improving the effectiveness of the performance appraisal process;
- Provide employee feedback more frequently than once a year
- Engage team in value of performance management process, incorporating employee development and training in part of review
- Use reviews as a means to express appreciation for personnel to help with staff retention
So why can’t a performance review be more like a retrospective?
“The Sprint Retrospective is an opportunity for the Scrum Team to inspect itself and create a plan for improvements to be enacted during the next Sprint.” 
Whilst it is acknowledged that the Scrum Retrospective premise is not perfect, it does offer a model which might better meet the objectives of the performance review. Many different approaches to conducting retrospectives are available and which expand upon the popular “what went well, what did not go so well and what can we do to improve” format.
Regardless of the model selected, the key benefits offered by the approach are: frequency, at the end of each iteration, a focus on evaluating the behaviours of the team (not their personalities), and has a requirement to identify concrete, time based steps which can be taken to improve performance.
The objective of the retrospective is to make things better for everyone, which in turn helps the organisation; it is deliberately non-judgemental and avoids (ideally) the issues of power imbalance that can arise from the traditional review. Most importantly, it explicitly identifies learning and development as an ongoing process, which must be both iterative and incremental.
The starfish retrospective model  seems particularly conducive to a more effective style of iterative/incremental performance review, especially the mutant starfish variant . This model is particularly good at identifying desirable outcomes and concrete steps to achieve them.
Consequently, it is interesting to ponder whether a performance retrospective process, conducted monthly or quarterly and where the discussion was informed by a model similar to this, would produce better results than the classic performance review that most people endure today?
- D. McGregor, “An Uneasy Look at Performance Appraisal,” Training and Development Journal, vol. 41, no. 6, 1957, pp. 66.
- “2014 Performance Management Survey – PerformanceReviews.net,” 2014; http://performancereviews.net/survey/.
- D. Pink, “Autonomy, Mastery & Purpose,” http://www.youtube.com/watch?v=wdzHgN7_Hs8.
- A.D. Avraham N. Kluger, “The effects of feedback interventions on performance: A historical review, a meta-analysis, and a preliminary feedback intervention theory.,” Psychological Bulletin, vol. 119, no. 2, 1996; DOI 10.1037/0033-2909.119.2.254.
- “Myers-Briggs Type Indicator,” http://en.wikipedia.org/wiki/Myers-Briggs_Type_Indicator.
- “SHRM Online – Society for Human Resource Management,” 2014; http://www.shrm.org/pages/default.aspx.
- J. Sutherland and K. Schwaber, “Scrum Guide™ | Scrum.org – The home of Scrum,” 2014; https://www.scrum.org/Scrum-Guide.
- “The Retrospective Starfish | thekua.com@rest,” 2014; https://www.thekua.com/rant/2006/03/the-retrospective-starfish/.
- “The mutant starfish Retrospective | Agile Karma,” 2014; http://agilekarma.com/2014/08/11/the-mutant-starfish-retrospective/.