Businesses would be better off providing regular and frequent feedback on employee performance, rather than conducting annual, or semi-annual, reviews like most employers do, new research finds.
From poor rating structures to fear of providing negative feedback, a new Rice University study cites a variety of problems that annual reviews inherently present.
The value of reviews depends upon managers providing accurate evaluations of their employees. However, too often, bosses avoid providing ratings at the low end of the review scale because they're worried about demotivating or disengaging their staff, according to the research.
Companies that ask co-workers to weigh in on their peers don't get a true account of how well their employees perform, either, the research showed. The study's authors said that since employees ultimately have to work together on a day-to-day basis, it's generally difficult and discomforting for peers to provide negative ratings or feedback.
Anecdotal evidence has shown that interpersonal political considerations are nearly always a part of the employee-review process, said Jisoo Ock, the study's lead author and a Rice University doctoral candidate in psychology. [Why Negative Performance Reviews Don't Work ... Ever ]
"Supervisors and co-workers may have a difficult time transitioning from being inspirers, motivators or even friends to being judicial evaluators of employees," Ock said in a statement. "Regardless of the nature of the organization, it is no surprise that raters will often tread carefully in ways that avoid negatively affecting their long-term relationships with those people whose performance they have to rate."
Another problem with the current review system arises when bosses don't regularly communicate with their employees, or only have interactions in which workers know that they have to be on their best behavior.
In these circumstances, it's hard for managers to identify things employees can improve on, Ock said.
"The nature and amount of interaction between managers and employees affects the performance dimensions on which raters have useful and accurate information," he said.
While there has been limited research conducted on informal performance-management systems, the study's authors said such evaluations have the potential to be much more effective.
The more employers can create a culture that facilitates ongoing communication and feedback among employees, the more productive and beneficial the performance-appraisal process will be, according to the research.
"Continuous feedback that occurs on a day-to-day basis in such an environment is much more likely to create real-time alterations in employees' job performance behaviors than are infrequent or annual formal-feedback sessions," Ock said. "Compared with formal feedback, informal feedback occurs naturally and is perhaps unexpected, which is why there needs to be an environment in which organizational members feel comfortable about providing and receiving frequent informal feedback."
The study, co-authored by Rice professor of psychology Fred Oswald, recently appeared in the journal Industrial and Organizational Psychology: Perspectives on Science and Practice.