Objectivity is the most important part of having an effective performance appraisal system. What you want is a system in which your top performers are recognized and then given opportunities to advance their skills. Meanwhile, rather than being discouraged, low performers should come out with the advice and motivation they need to improve their performance. Unfortunately, this isn’t always the case.
A CEB survey found that 9 in 10 HR leaders don’t believe annual performance reviews result in accurate information. Imagine you have a talented employee who gives 110% but finds his or her performance evaluation doesn’t reflect all the hard work. Eventually, his or her disillusionment will turn into disengagement. Then the employee will begin to look for another job where he or she feels his or her work will be appreciated. The U.S. Department of Labor reported that the number one reason Americans leave their job is because they don’t feel appreciated.
Whether we realize it or not, our brain has a natural tendency to sort information into groups in order to process it more easily. This can lead us to make snap judgments about a person without even realizing it. Some psychologists call this the Idiosyncratic Rater Effect. They found that on average, 61% of a rating is based on the judgments of the rater rather than the ratee. When one person’s unconscious bias is applied to performance appraisals, it can lead to inaccuracy, favoritism, and even unfair treatment of employees based on their age, sex, race, or sexual orientation.
However, there are ways to mitigate the effects of unconscious bias. Here are five common types of biases that affect performance appraisals and how to overcome them.
Central Tendency Bias
This is one of the most common forms of biases that can impact your performance reviews. Whenever you have a five- or three-point scale, raters have a tendency to lump the majority of their employees in the middle. This happens most often when managers have a low performer and just can’t bring themselves to give him or her a low score, fearing they’ll damage their employee’s confidence. This is actually worse for low performers, as it doesn’t clue them in to the fact that they need to improve or give them any valuable information about what they need to focus on.
How to overcome:
In the past, to overcome this natural tendency, tactics such as forced rankings were used to push managers to rank each of their employees against each other. However, as we have seen, forced or stack ranking has a negative impact on performance. Instead, ranking employees against each other creates high competition and animosity within teams. Rather than working together, teams begin to work against each other to receive a higher score.
To overcome central tendency bias, instead base performance appraisals on specific competencies. Everyone has his or her strengths and weaknesses. Maybe one of your employees is not a strong public speaker but he or she is a good writer. Rather than focusing on public speaking, push that employee to improve his or her writing skills, and give him or her assignments to build this strength. The most valuable information employees can get from the review process is an insight into their strengths and areas for improvement. Encourage managers to really highlight both in each employee’s review so that afterward, they can create an effective development plan.
Recency and Spillover Bias
Our ability to recall employees’ performance can also have a major impact on their results. Remembering accurately how each employee did throughout the year is almost impossible. It can be especially difficult to recall projects that were completed during the first and second quarters. Recency bias occurs when managers rate an employee based on his or her most recent performance, leaving out the whole picture. Alternatively, spillover bias occurs when managers continue to rate an employee based on past performance, failing to take into account recent improvements.
Forgetfulness on the part of the rater can actually lead employees to be overvalued or undervalued for their work. This is especially demotivating for employees who show improvement later in the year but continue to be rated based on their previous performance.
How to overcome:
Ditch the annual review. It’s much easier for people to recall the performance of an employee over the course of 3 months than over the course of a year. Consider instead implementing quarterly or biannual reviews. This doesn’t have to take up time. There are new tools that can help you set up reviews quickly and more frequently.
Tomorrow we will hear more from Maier about performance appraisal bias.
Steffen Maier is the co-founder of Impraise, a people-enablement platform. Impraise’s belief is simple: Grow your people—grow your business. It helps unleash people’s potential, doing more than just performance reviews, which means accelerating performance, fostering career development, and seizing all the moments that happen in between.