A deeper look into why we should move from performance reviews to performance management – including the most common biases affecting managers when they conduct performance reviews.

It can be argued that performance reviews are slowly shifting to what is understood as performance management. I’d like to focus on that change and adaptation in performance reviews as well as the ongoing challenges HR and managers experience in designing and conducting performance reviews.

Performance review vs performance management

Over the past 50 plus years, management has drastically changed, from the 1950s where managers got to ‘play god’, through to the 1980s where performance measurements started to become what we think of them as today.

There is a significant difference between performance reviews and performance management.

Performance reviews are regular meetings that allow managers to appraise the performance of employees.

Performance management is the refinement of review, designed to manage individual performance, organisation and company goals and values. It focuses on broader HR initiatives and policies. For example, talent management and training and development. It is a two-way process where individuals and the team are aligned with the company’s overriding strategy.

Why bother with performance reviews?

Performance management is carried out for a number of reasons

• To communicate a shared vision of organisational objectives
• To define expectations
• It allows the employee to monitor their own performances
• It puts all employees on an equal footing
• It helps managers and HR understand developmental needs; it’s not simply blaming people for poor performance
• It’s a negotiated process instead of a hierarchical, top-down process
• It’s forward-looking and encourages people to buy into process-self management. And it gets employees thinking about what they need.

PM should be seen as an empowering process for both employees and employers, allowing both parties to comfortably set and reach goals without belittling one another. If done effectively, labour turnover should decrease.

Reasons why performance reviews fail

Traditionally, ‘reviews’ have been seen as a top-down technique. Performance reviews have produced a host of issues that undermined their intended purpose. Specifically, managers are prone to certain biases that hamper their ability to provide the employee and the organisation with a true picture of performance.

These include:

1. The ‘halo effect’ is where a single attribute, or the general impression of the individual, is used as the basis to rate their entire performance. For example, the employee could be an extrovert who gets along with everybody, and the manager values this so highly they ignore that they have failed to meet several of their KPIs.
2. The ‘horns effect’ is the opposite. This is where the manager’s overall impression of the employee is negative, based on a single piece of evidence or no evidence at all.
3. ‘Recency bias’, usually happens when a manager does not produce detailed/precise notes before reviews. They then have a tendency to rate the employee based on their most recent project, or how they’ve been behaving in the past month or so, rather than getting a full picture of how the employee has performed over a period of time.
4. Cronyism, or the ‘crony effect’, is where the manager is biased towards rewarding the employees they’re closest to on a personal level. It’s different from the halo effect in that it’s more clearly a tit for tat situation. Rather than overvaluing their impression of the employee, they privilege the relationship they have with them – often actively promoting them above employees who don’t have that same relationship.

(Want to find more out about unconscious bias and how to overcome it? Find out about AHRI’s custom learning course, and its managing unconscious bias toolkit.)

Hannah Pryjmachuk is Marketing and HR Coordinator at Precision Sourcing. Her original article can be found on their website.