Employee Performance Reviews: Importance and Best Practices

Introduction

For better or worse, surveys of employees all over the world have shown that the vast majority of organizations use some type of performance appraisal to keep track of employee performance and to provide timely and accurate feedback about what employees are doing right — and wrong. Although there may be important societal or organizational cultural considerations that make some people more comfortable with open discussion, and contexts where it is acceptable for managers and employees to give and receive feedback, these cultural differences are not an excuse for avoiding the review and discussion of performance. In fact, all organizations and managers should ensure that their practices and behaviors are appropriate and sensitive to the needs and aspirations of their employees.

Performance appraisals will undoubtedly add pressure on managers' time, and they might also be a source of disappointment or discontent for employees who feel they are treated unreasonably. However, a recent study reveals that, for a majority of more than 35,000 people surveyed, the annual appraisal process was found to: (1) encourage employees to feel valued, (2) engender a sense of personal and career development, and (3) increase organizational commitment.^[1] For whatever reasons, in many aspects of their working lives, people who receive timely and accurate performance appraisals have been found to be significantly more satisfied and feel significantly more positive than those who do not.^[2]

Methodology

To determine how managers today can successfully implement and administer an effective employee performance review system, this paper examines peer-reviewed and scholarly literature to identify what factors are regarded as important from both the employee's perspective and from a management perspective. An analysis of the implications of both positive and negative performance reviews is followed by an examination of the legal and ethical implications of the review process. A summary of the research, salient findings, and relevant recommendations is provided in the conclusion.

Background and Employee Motivation

Besides driving in heavy traffic, managing other people and making performance judgment calls has always been one of the most difficult things most people are called upon to accomplish in the workplace. Nevertheless, the need for performance reviews has long been recognized, and it is likely that this process was implemented shortly after the first worker drew wages and agreed to abide by certain conditions. Rudman suggests that, "Ever since, employers have been making judgments about their employees: Are they doing what we want them to? How does this person's performance compare with others? What are this employee's strengths? What training does that employee need? Shall we give this employee a salary increase? Or promote that employee?"^[3]

A major issue in understanding employee motivation is associated with the way people feel about their jobs. According to Risher, early research into employee motivation in the 1950s linked motivation with job satisfaction; the findings from this research indicated that there were specific factors contributing to job satisfaction, including achievements, recognition, responsibility, opportunities for advancement, and the work itself.^[4] More recent thinking on employee motivation has shifted toward developing employees who will identify with the goals of the organization and who will be proud to be associated with the company. To the extent that these goals can be accomplished is the extent to which employees will likely remain highly satisfied with their work and motivated to help the company achieve its organizational goals in the future.

"A dedicated employee is willing to put discretionary energy behind something without being monitored or supervised," Risher says. "It's about working hard because the individual believes in the goals of the organization. Those two actions — intentional engagement and discretionary energy — are evident whenever someone works hard to accomplish something, from a Pete Rose in baseball to the police and firefighters who worked to save people on 9/11."^[5] The commitment of an employee to a company's goals remains a powerful motivator, and the resulting job satisfaction is equally important and clearly contributes to a healthy work experience. When workers commit themselves to the success of a company and understand that they are empowered to resolve day-to-day problems, they will be willing to do almost anything necessary for continued success. Risher suggests that, "Of course they experience satisfaction, but that is after-the-fact and not what drives their efforts."^[6] Given the importance of employee job satisfaction and motivation on a company's bottom line, identifying methods by which these can be facilitated is clearly an important goal for managers today.