Do Performance Reviews Tell the Whole Story?

For many organizations, the end of the year means Performance Reviews. These reviews are typically top-down. A manager rates his or her subordinates on their performance, and sits down with that employee in a formal review process. However, do managers really know how their employees are performing? Research suggests the answer may not be what most managers want to hear.

Performance Reviews and 360 Degree Feedback
DecisionWise recently completed a three-year study involving 147 employees in a large manufacturing facility of a Fortune 50 company. The purpose of this study was to determine whether or not managers had a comprehensive understanding of how well their employees were performing. Typical of most organizations, this company had been using a traditional performance evaluation completed annually by each employee’s supervisor. The results of these evaluations were typical of what we find in most companies. The facility had its share of high performers, strong-and-steady performers (the bulk of employees), and a few poor performers.

This plant also conducted regular 360 degree feedback assessments with each of these employees. These 360s were used purely for developmental purposes, and were not tied to the annual evaluations. Many of the 360 survey questions related to behaviors: how the job was getting done, versus what was getting done. Factors included such "soft skills" as leadership, interpersonal skills, communication, ethics and integrity, and decision-making. However, some of the "hard skills" were also included: overall performance, job-specific skills, safety, sanitation, legal and regulatory compliance, etc. Each employee was rated by his/her supervisor, peers, direct reports (if applicable), and other co-workers.

Do Performance Reviews tell the whole story?
We tracked each employee over a three-year period, comparing annual performance reviews to 360 degree feedback results. Logic would have it that those scoring high on one assessment would also score high on the other, right?

Our findings surprised us. We looked at each employee, and laid out each employee’s performance review alongside their 360 score. After extensive statistical analysis, we found no correlation between the scores given on an employee’s annual review and that same employee’s 360 feedback scores. The closest we came to a correlation was finding that those who typically scored in the top 10% of one assessment typically scored in the top half on the other. The same held true for those in the bottom 10%.

Different Points of View
These findings were troubling until we found additional factors that shed some light on what was happening. Managers typically gave the highest performance evaluation scores to those employees to whom they also gave the highest scores in areas of compliance and results. In other words, if an employee met the basic production requirements of the job, as well as complied with rules, policies, safety, and legal regulations, they received high performance evaluation marks.

Interestingly enough, an employee’s peers, subordinates, and others were looking from another direction. Those employees who received the highest overall 360 degree feedback scores were not always those scoring high in meeting production and compliance targets (as was the case with the annual performance evaluations). They were those who excelled in areas of interpersonal skills, teamwork, and communication. Co-workers were in a position to evaluate factors about this person that managers would typically not see on a day-to-day basis. They worked side-by-side, day-by-day with their co-workers. Managers did not. They saw (and rewarded) elements of an employee’s performance that this employee’s manager did not.

Do managers know how their employees are performing?
Who is right when it comes to evaluating levels of performance? First of all, it’s important to note that true overall performance is a combination of both operational performance (the what- as was held in high esteem by the managers, in this case) and interpersonal performance (the how- as was indicated by co-workers). We found, in fact, that a person could get the operational results by leaving a wake of dead in his or her path- which was happening in some cases. True performers, however, excelled in both operational and interpersonal performance.

So, back the question: Who was right when it came to evaluating performance in this case- the manager, or the co-workers? The obvious answer is both. Unfortunately, many managers fail to take notice of what goes on beyond the operational performance that they typically see.

The Impact
Understanding and measuring true performance has impact not only on annual performance evaluations, but on areas such as succession planning, employee development, promotion, compensation, and list goes on. In order to ensure that managers have a complete picture of an employee’s performance, he or she must look at more than just operational performance. An understanding of how the employee deals with the interpersonal component or "soft skills" is a critical part of performance. Quite often, the only way to get this additional view is to gather feedback from others. Having this additional feedback makes the performance review meeting more meaningful, and facilitates an open discussion about future goals.

Want to learn more about incorporating 360 degree feedback into the performance review process? Here are some additional resources:

Copyright 2008 by DecisionWise, Inc.