The Problem with Traditional Performance Reviews: An Interview with Tamra Chandler

It's no overstatement to call employee performance-management reviews torturous. For decades now, they have been the bane of many organizations and their HR departments. Lawsuits aren't entirely uncommon. Most recently, a group of Yahoo ex-employees has taken the company to court of its review process. There may be a light at the end of the tunnel, though. High-profile companies such as Adobe, Gap, and Netflix have nixed formal performance reviews altogether.

As a former HR guy, I wanted to find out more about these changes. To this end, I recently sat down with Tamra Chandler, a bona fide people maven. In her day job, she runs PeopleFirm, one of Washington state's fastest-growing businesses and most successful women-owned firms. She has penned a new book, How Performance Management Is Killing Performance-and What to Do About It.

PS: What's wrong with traditional performance management? Was there a tipping point or is this the result of a gradual erosion of the process?

TC: Unfortunately, there is a lot wrong with traditional performance management. The crazy thing is that none of us set out to build a bad system or solution; yet, despite all the best intentions, traditional performance management fails more often than not to deliver what it is intended-improved performance for individuals or the organizations they work in. In the book I boil the "what's wrong" question down to eight fatal flaws. For example, nobody opens up with the person who pokes them in the eye. Traditional performance management impedes the reception of feedback and limits honest dialogue. This flaw speaks to the gaming that often occurs during an annual review discussion. Because of what's at stake and because of the design of the system, those meetings often become more of a negotiation than a rich conversation about development and contribution.

PS: Doesn't paying for performance lead to better performance. ?

TC: No, we are not Pavlov's dog. Too many traditional approaches to performance management are based on the assumption that greater rewards will drive greater performance. This can be true if there is a very direct link, meaning that I know that if I do X then I get Y in return, like in a sales organization. But most of us don't show up day-in and day-out, thinking, "If I work just a bit harder today my merit increase might be one percent higher next year during our review cycle." It simply doesn't happen, nor is that what really gets us up and out of bed in the morning. Most of us are far more likely to go the extra mile based on intrinsic rewards, like the mission of our organization or the experiences we're gaining on the job. In short, I sum it up by saying that traditional performance management has tried to mechanize a human process, and in doing so we've lost the humanity in it. Now it's time to bring it back.

I wouldn't say there was a tipping point. I'd describe the phenomenon more like a snowball that has been building for the last three-plus years and that has been influenced by several factors. As more people began to challenge our traditional approach, more research, some new and some not so new, has come to the forefront and shed a big spotlight on this topic. Then, as the snowball has gained momentum, more leaders in HR and executive levels have fessed up that they don't like or even trust the traditional process. Then throw in the fact that the way we work has significantly changed, and we add more momentum to that snowball. For example, many organizations are working to bring more freedom and trust into the workplace, yet traditional performance is counter to those ideals. As a final note, however, despite the momentum this topic has gained over the past few years, as of today only a small percentage or organizations have radically changed their approach. But given the momentum we are seeing, I believe many more will take it on in the next one to two years.

PS: In traditional performance management, is the focus on the individual or the system? Is this a problem?

TC: That's a tricky question to answer, actually. If you're talking about the traditional review process, I'd say traditional performance management is focused on the individual. In fact, that's one of my fatal flaws, which explores the concern that traditional models fail to consider the system as a whole

Research reveals that we pick up high performers and drop them in another setting. They may no longer be high performers because they no longer have the elements around them that made them successful. Therefore, to consider someone's performance without considering the system they are operating in is a myopic view. Yet we set out to do it in many organizations year in and year out.

However, as I said, it's a bit of a trick question, because other elements of traditional performance management take more of a systems view and look at the employee base as a collective, with the goal of forcing the whole into a fixed construct-like a bell curve or, even worse, a stacked rank. We do this seeking distribution and balance, but the outcomes rarely produce true equity and are often perceived poorly by managers and employees alike.

PS: Is this why many high-profile companies such as Adobe, Gap, and Netflix are nixing formal performance reviews?

TC: Yes, I think the organizations that are moving away from traditional performance management have recognized the conflict between the cultures and experiences they want for their people and the influence or impact a traditional model has on employees and teams. If we want collaboration, for example, why create a model that pits people against each other? If we recognize that true performance comes from building off of people's strengths, why create a process that tends to focus on the negative? Most of the organizations that have moved beyond the old-school ways have gotten clear on what the goals of performance management represent in their companies, whether it's to develop people, drive organizational performance, or reward equitably, and have designed solutions that fit their cultures and intent. It's a much better way to go.

PS: What are the downsides of comparing employees to each other?

TC: Ha! My question back would be, "Are there any upsides?" I guess for the super-competitive top performers-maybe? But no, I see very little good and a lot of bad that comes from this idea of trying to make side-by-side comparisons in a qualitative way. Why? Many reasons. The first being that we as humans have a very hard time distinguishing anything that isn't either really good or really bad. Most of the stuff in the middle is hard to compare, and it gets even worse if you're comparing people who have different roles and different accountabilities. Then there's the fact that we are all biased, despite our best intentions. In fact, when I give someone a rating, there is this phenomena known as "the idiosyncratic effect" that has shown the rating I've given them is much more about me than it is about them. Finally, if what we're trying to do is create engaged, enthusiastic, and happy people, we certainly aren't getting there by comparing, rating, or ranking our teams. The only person happy in most of those scenarios is whoever comes in at #1, because it's all downhill from there, even for the employee who is ranked second.

PS: Isn't there a fundamental problem with timing for many employee evaluations? That is, shouldn't employees receive real-time feedback--not just quarterly or annual reviews?

TC: The short answer is yes. Nothing is better than providing insights in the moment, or as close to the moment as possible, as opposed to creating a window or two during the year to share your perspective. Also, we'd all be better humans if we received insights from more people than just our bosses. So the real nirvana that most people are seeking is to build healthy cultures where feedback and coaching is part of the everyday. The truth is that most of our organizations are pretty far away from that aspiration. To get there, we need to build some muscle, and we may need to do some culture work to create an environment where being open and honest feels safe. So for some organizations, you might start by significantly increasing the planned conversations, while building leadership and employee capabilities that align to an open feedback culture. In other words, be mindful about how you build that feedback muscle.