As employers cut and freeze salaries and bonuses, some might see this year's performance evaluation process as a waste of time. Yet HR experts assert that a down economy is no excuse for companies to stop or scale back on conducting performance reviews.
Granted, compensation budgets have become casualties of the recession at most companies, but performance evaluations can give workers a sense of job security and help employers to detect a pattern of mismatched expectations between workers and management.
“Human beings have a fundamental need to know how they are doing. It’s simply part of who we are and what we are about,” says Jack Wiley, executive director of the Kenexa Research Institute, an HR consulting firm.
Kenexa conducted a study on how performance evaluations can affect workers’ perceptions of their managers and organizations. The research found that about 60% of workers in major global economies received a performance appraisal within the past 12 months. Workers in Spain (39%) are the least likely to receive a performance evaluation, while 70% of U.S. employees reported receiving a performance review.
“It’s amazing that two-fifths of the world’s workforce is not receiving any formal feedback on their job performance and how they are contributing to their employer’s success,” Wiley notes.
Researchers at the Pennsylvania-based company concluded that performance appraisals have a positive influence on employees’ engagement level and views toward their immediate managers, resulting in workers taking pride in their company and recommending it as a place to work.
Most importantly, workers who are put through the appraisal process are more likely to stay with their employer longer, compared to workers who have not received a performance appraisal, according to Kenexa’s research.
“When we gauge the positive impact of this important talent management tool, we once again see that building an engaged workforce is often based simply on the fundamentals. In this case, it is about managers and leaders communicating expectations and providing their employees feedback,” Wiley says.
Performance ratings and appraisals, especially in a recession, can inform employers about whether their talent management objectives are being undermined because of a disconnect over expectations between workers and their managers.
According to a recent study by the Novations Group, a Boston-based firm specializing in talent management, managers and their subordinates may not see eye to eye on performance ratings.
In the 2007 study, managers had to rank their direct reports in terms of contribution and performance by completing a behavioral and competency-based survey on the subordinates. The workers were also asked to complete the same survey by providing their own assessment of their contribution.
The research, outlined in the white paper "Mind the Gap: The discrepancy between manager and direct report ratings," reveals that managers rated their workers about a half of a stage lower than the workers rated themselves. “Behaviorally, this suggests that managers believed their direct reports were behaving more dependently than independently,” researchers note. The data involved over 2,000 managers and their direct reports.
“It's not all that surprising to hear that managers and employees disagree on their level of contribution, but organizations need to be concerned by this,” says Paul Terry, vice president of global partnerships for Novations. “Today, everyone is trying to do more with fewer employees, so it's more important than ever that managers are clear in setting challenging, but realistic, expectations that help employees stretch and maximize their contribution,” he adds.
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