Decoding the Big Myth of Performance Reviews
What is a "5", anyway?
Boy, have I seen a lot of performance reviews. And virtually every one contains a Big Myth that executives seem to believe.
That myth is they allow for objectivity in appraising each employee.
This of course is nonsense; trying to decide whether to assign a “4” or a “5” is as subjective as you can get. (One exception is sales, with clearly defined quotas. Another was the best performance review I ever saw.)
But 99% of performance reviews are the antithesis of fairness. But to be effective, they need to be consistent throughout your organization. Especially with small businesses.
Annual performance reviews have some advantages. It provides a method for managers to provide feedback, set goals, and get employees on the same page. (In reality, informal feedback and stay interviews should be conducted throughout the year, but let’s focus on the annual review for now).
But consistency in performance ratings? Not so much.
In my junior high school yearbook, every teacher had their picture.
Next to Mr. Barney’s picture was the caption “Let’s see….two wrong answers…a D-.” Next to Mr. Warren’s picture the caption read, “Hmmm… -25… an A+!”
You can see what a reputation as an easy or hard grader can do.
But the most legitimate complaint about performance reviews is it’s inherently unfair.
To counter this perception, get your managers together as a group and get them in alignment and what a 5 really means at your organization.
With the performance review season upon us. Here are my thoughts on defining what performance is on a scale of 1-5. If you use numerical ratings, you have to get managers to be consistent.
What is a “5”?
A 5 is exceptional performance at all times. There is no room for improvement. When you assign a five that means the employee can't do that job (in that category) any better. So assigning a “5” should be rare. For example, in attitude, it means you have somebody that comes in with a great attitude every day. They're always thinking about ways they can help improve the company. It means there isn't ever a time that they don't own and live a positive attitude. Even when things are tough, that person maintains an exceptional attitude. That person may not be a 5 in every category, but in that one area, they are exceptional.
What's more, everybody in the company knows that person is a 5. When people talk about attitude, they point to that person as exceptional. They're the model employee.
What is a “4”?
A 4 is above standard, meaning that person exceeds expectations most of the time. Perhaps they‘re particularly good in most areas within that category, but they're not perfect. For example if a person has a particularly good attitude 90% of the time, it means they’re a “4”. Giving a “4” is reserved for really good employees. Less than 20% of your team is likely a 4.
What is a “3”?
The most important thing to remember about a three is that it is not a bad number. Three is a good job. It's important that managers know how to communicate that. Most people are going to get threes. What are our expectations of somebody who is good? That's what a “3” is. Three means you meet our expectations of being a good employee. A “3” is like a silver medal in the Olympics; it's pretty darn awesome. 3 is a good job; most of your employees sit in the 3’s. A “3” at our company might be a 4.5 or 5 anywhere else at one of our competitors.
What is a “2”?
A “2” is someone who needs improvement and needs improvement right away. It shouldn't come as a surprise to the employee that they are receiving a 2 in any category. It should've been discussed at length long before the session. This means an employee who simply does his or her job in an adequate way. There is nothing special about them. They just show up and do their job. That is not what we're looking for in our company; we’re looking for more. We are looking for people who can take us to that mythical next level. A “2” in this company should be rare.
There are two types of 2’s. Those who were ascending, and those who are descending. It's important to delineate the two of them. Someone who's a 2 but improving in that area should receive credit for taking steps to improve. The conversation should focus on ways to continue to improve. But if someone is declining and a 2, it's different. In this case, a serious conversation about the need to improve in needed. Establish clear deadlines for improvement. A 2 who stays at 2 needs to re-think their career with your organization.
What is a “1”?
A "1" one is somebody who should already have been fired. Any "1" in any category is unacceptable in our organization. Shame on you if you have an employee who's a “1” at the time of their annual performance review. Why hasn't that employee been terminated?
When an employee does something that deserves a "1", don't wait until the performance review. Immediate feedback and disciplinary action are needed. The employee should get one more chance to prove that they are not a 1. If they can’t prove that within 30 days, they need to find employment elsewhere.
Remember: a review doesn’t have to have ratings. It’s a vehicle to get management and employees pulling in the same direction.
Just so you know, I personally write each one of my posts. There’s no AI or ghostwriter here; it’s just me.