Survey: Performance reviews get poor ratings

Friday - 12/3/2010, 7:48pm EST

Kerry Chou, WorldatWork, and David Insler, Sibson Consulting

Click to hear the interview.

Download mp3

Performance reviews are a way to meet an organization's mission and help differentiate poor and high performers. But a recent survey found that performance reviews aren't that effective.

The biggest challenge to a review's effectiveness is the manager's inability to have a difficult conversation with a poor-performing employee, according to the survey from WorldatWork, a human resources association, and Sibson Consulting.

The challenge is even greater when a manager rates all employees highly and then has to differentiate within those employees, said Kerry Chou, senior practice leader at WorldatWork, in an interview with the DorobekINSIDER.

"You have a situation where you have lots of people rated in the upper categories and then you have a vetting process where with only a certain pool of money," Chou said. "Then you start making those more difficult decisions. That's when the process tends to break down."

He added, "Managers lack the courage to have those difficult performance discussions."

Organizations are also noticing a disconnect between individuals' performance reviews and the success of the company. Even when a company is not doing well, managers are giving employees high marks, said David Insler, senior vice president at Sibson Consulting.

According to the survey, 20 percent said employees receive high performance reviews even when the organization performance is poor or below target.

Chou said management needs to take more ownership over performance management from human resources.

"The CEO and senior management team really need to believe in performance management and not look to HR to say, OK, it's time to do our annual review, let's have HR administer the process. That's not the way to do it," Chou said.

The survey found the top goals for performance reviews were differentiated rewards, greater individual accoutnability and talent development. The top three challneges are managers' inability to have difficult performance conversations with staff, management's view of performance reviews as an HR function and poor goal setting.

Read about the survey results in the Wall Street Journal.