The Top 3 Mistakes Companies Make When Implementing Performance Reviews

Performance reviews should help employees understand what is expected of them, recognize where they are succeeding, and identify where there is room to improve.

But when organizations introduce a performance review process, they often make it more complicated than it needs to be.

Suddenly there are lengthy forms, rating scales, scoring systems, compensation decisions, and annual meetings that everyone dreads.

That can turn what should be a useful management tool into an administrative exercise.

At LinkHR, we believe the foundation of good performance management is much simpler:

Set goals. Measure progress. Talk about performance. Learn from what happened. Decide what comes next.

If you are implementing performance reviews in your organization, here are three mistakes to avoid.

Mistake #1: Making Performance Reviews Too Complicated

The biggest mistake organizations make when introducing performance reviews is trying to build the perfect system right away.

They create detailed competency frameworks, lengthy questionnaires, complicated rating systems, weighted goals, approval processes, and pages of documentation.

Some of those tools may eventually be useful.  But they are not where you need to start.

Before building a sophisticated performance management system, managers and employees need to get comfortable with the basics.

Start by setting clear goals

Employees need to understand what they are expected to accomplish.

A useful goal should answer questions like:

• What are we trying to achieve?
• What does success look like?
• When should this be completed?
• How will we measure progress?

The goal does not need to be complicated. It needs to be clear.

Measure progress

Goals should not be written down in January and forgotten until December.  Managers and employees need to regularly look at whether work is moving in the right direction.

That could mean looking at deadlines, deliverables, milestones, project results, quality measures, or other indicators that make sense for the role.

What matters is building the habit of monitoring performance while the work is happening.

Talk about performance

This is the part organizations sometimes skip.

A performance review should not be the first time an employee hears that something is going well or that something needs to improve.

Managers need to become comfortable having regular conversations about:

• expectations
• progress
• challenges
• results
• support
• development

Before adding another form or piece of software, ask yourself:

Are our managers and employees comfortable setting goals, measuring progress, and talking about performance?

If not, start there.  You can always add complexity later.

Mistake #2: Tying Performance Reviews to Compensation Too Soon

Another common mistake is introducing a new performance review process and immediately tying the results to raises, bonuses, or other compensation.

It may seem like a natural connection.  Good performance should be rewarded, right?

But introducing compensation too early can make it much harder to establish healthy performance-management habits.

If an employee knows that their performance rating directly affects their income, the conversation immediately becomes higher stakes.

Instead of focusing on:

“What can I learn from this feedback?”

they may be thinking:

“How is this going to affect my raise?”

Managers may also become less comfortable giving honest feedback when they know it could directly affect an employee’s compensation.

Before connecting performance reviews to bonuses or other incentives, build a culture where people are already comfortable:

• setting goals
• measuring progress
• discussing performance
• receiving feedback
• adjusting expectations
• documenting achievements and challenges

Once those behaviours are established and people trust the process, compensation can become another layer of the performance-management system.

It does not need to be the starting point.

Mistake #3: Only Talking About the Past

A performance review naturally involves looking backward.

What did the employee accomplish?

What goals were completed?

What did not go according to plan?

But if the conversation ends there, you are missing one of the most valuable parts of the review.  The past should help you plan for the future.

Instead of simply asking:

“Did we hit the goal?”

ask:

“What did we learn from working toward this goal?”

If a goal was missed, explore why.

Was the goal realistic?

Were expectations clear?

Were there obstacles that were not anticipated?

Did the employee need additional resources or support?

Was progress being discussed regularly enough?

Is there a skill that needs to be developed?

Then move the conversation forward.

What can we do differently next time?

What should the next goal be?

What skill could this employee develop?

What support would help them perform more effectively?

The same applies when someone exceeds expectations.  Do not simply check the box and move on.  Talk about what contributed to their success and how they can build on it.

Performance reviews should not simply document what happened.  They should help employees and managers decide what happens next.

A Simpler Way to Approach Performance Reviews

If your current performance review process feels overwhelming, you may not need another form.  You may just need better conversations.

A useful performance review can start with five questions:

1. What were we trying to accomplish?

Review the employee’s goals and expectations.

2. What happened?

Look at the results and progress.

3. What did we learn?

Talk about what worked, what did not, and why.

4. What should we do differently moving forward?

Identify changes that could improve performance.

5. What skill or capability should we develop next?

Create a development goal that supports both the employee and the organization.

That is the foundation of performance management.  Everything else can be built around it.

Start Simple and Build From There

You do not need a complicated performance review system to start managing performance more effectively.  In fact, trying to do too much too quickly can make the process harder for everyone.  Start by helping managers and employees get comfortable with the fundamentals:

Set goals.

Measure progress.

Talk about performance.

Learn from the past.

Plan for the future.

Once those habits become part of your workplace culture, you can refine the process, introduce additional tools, and potentially connect performance to compensation.

The goal is not to create the most sophisticated performance review process.

The goal is to create a process that people actually use to improve performance.

If your organization is introducing performance reviews or your current process has become too complicated, LinkHR Inc. can help you build a practical performance-management approach that works for your managers, your employees, and your workplace.