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NextGen Magazine

 
 

A Closer Look at Performance Reviews: What Works and What Doesn't

By:
Karen Sibayan
Published Date:
Dec 18, 2024

Even though years have passed after many major firms discontinued number-based ratings in performance reviews, the manner in which reviews are done is still a hot topic today, CFO.com reported.

The Academy of Management Discoveries published a paper last summer to determine whether companies should follow the trend toward narrative reviews instead of numerical reviews.

According to CFO.com, the authors conducted experiments with 1,600 U.S. workers, comparing their reactions to performance feedback when reviews were numerical-only, narrative-only or a combination of the two.

The findings indicated that “narrative-only feedback was generally perceived as the fairest,” the authors stated. On the other hand, the other two formats were viewed as fairer “when the feedback was extremely positive or when recipients were informed about associated monetary outcomes.” CFO.com reported that the research also showed narrative feedback often encourages employees to be more motivated to improve their work performance.

CFO.com cited an article published in November by the Harvard Business Review, in which the study’s authors indicated that narrative feedback is usually viewed positively due to its usefulness in setting future goals and development paths. 

It also cited another article in 2024, first published in May but highlighted in the Dec. 3 edition of McKinsey & Co.’s “Only McKinsey Perspectives” newsletter, that addressed the balance between assessing “what” employees accomplish and “how” they go about doing their work.

In McKinsey’s survey of 1,800 firms with revenue of at least $100 million, roughly three in five of them stated that they look at a mixture of the what and the how.

For the “what,” the article noted that firms have historically utilized quantifiable KPIs and measurable outcomes. However, much corporate work is “complex, multifaceted and fast-paced and can be difficult to capture with rather static KPIs. "

That has incentivized many firms to link what McKinsey called “objective key results” to defined objectives. “The objectives represent qualitative, aspirational goals … while the key results are the quantifiable metrics used to measure progress toward those objectives,” according to McKinsey. “The objectives provide context and direction, capturing the broader strategic intent behind the measurable key results.”

The article noted that firms partly focusing on the “how” take into account qualities including collaboration, communication, adaptability, and ethical decision-making. These considerations “can help assess leaders whose teams’ outcomes can be hard to measure,” including long-term projects, complicated initiatives or qualitative improvements that are harder to quantify.

CFO.com also cited a paper in the June issue of the Journal of Business and Psychology that took a gender-based approach. The study results indicated that although women receive more positive verbal feedback in reviews, they also tend to receive lower numerical ratings.

The authors called this trend “protective paternalism,” which might result from managers’ apprehension that they seem biased in their verbal comments to female employees.

Performance reviewers who might feel social pressure not to show prejudice “might overcorrect when delivering performance feedback to women” by, for instance, not mentioning negative performance aspects or highlighting them instead.

The authors conducted a study showing that reviewers who criticize women’s work performance tend to be seen as more prejudiced and less communal compared to those who criticize men’s performance, “thereby highlighting a reason why individuals succumb to social pressures and deliver inflated feedback.”

Meanwhile, a September Bloomberg article about the study stated that regardless of which aspect of the performance review is more accurate, “the gap between the two is a problem,” saying that numerical ratings are usually used to calculate bonuses and award promotions.