Why the performance review is damaging your business

by Human Capital04 Jul 2012

What’s wrong with performance reviews? A better question might be what’s right with them and how can they be improved? Graham Winter provides some insights.

Can anyone explain why the vast majority of business leaders (HR or otherwise) refuse to challenge and innovate the performance review despite its many shortcomings?

Maybe some of these reasons given by HR leaders make sense:


  • The performance review is essential to align salaries with business performance
  • We need it to calibrate bonuses
  • Many staff like doing it because it gives them feedback
  • The Executive and Board believe we’d lose control of accountability without it
  • It gives staff a chance to discuss their careers.


Okay. Point taken (perhaps). But please humour me for a few moments while I explain why it’s what the performance review does not do  that is creating the real damage to your business.

Too slow

In an economy where tight budgets, disruptive change and the pressure to perform are a given it is essential that every business (or government agency) adapts quickly to change.

Cycle times from planning to execution are getting shorter and change happens in an instant, which means that the speed of feedback and learning must match this acceleration. Of course this challenges two of the pillars of management: the annual business plan and the performance review.

Surely the performance review can’t be taken seriously as a genuine feedback and learning process. It is simply too slow and focuses on a very narrow definition of performance.

Performance conversations cycle

What’s needed is something faster, and that’s precisely what you will find in nimble, adaptive and high performing organisations: a performance conversations cycle  that delivers feedback and learning at the speed of the environment in which the organisation operates. 

For example, in the special military forces that’s defined by the mission, in emergency medicine by the critical events, and in leading-edge businesses by the rhythm of the market.

A performance conversations cycle is a very simple concept.  It contains three types of conversations:


  • Alignment – to clarify purpose and expectations
  • Collaboration – to address problems and opportunities while action is happening
  • Debriefing – to capture learnings about how to adapt (and therefore realign)


High performing organisations embed these three conversations in a disciplined, time-efficient system between leaders and their direct reports, and within and between teams.

If your organisationis confronted by fast and unpredictable change in technology, markets and the like,thenthe most powerful adaptive tool available is the performance conversations cycle.

An example illustrates the value

A mid-sized electronics company (details changed to protect confidentiality) recognised last year that their business planning and performance review cycles just weren’t sharp enough to keep people aligned with their frequently shifting business strategy. 

The signs were all too visible: misaligned teams, disgruntled staff because projects were cancelled, ripples from small numbers of redundancies, loss of two key staff, and turf fights between leaders over budgets.

Previous attempts to handle this were straight from the old-school HR Manager’s toolkit. 

For example, in the lead up to the six monthly performance reviews all managers and team leaders attended feedback conversations training (including how to handle difficult conversations) and were told to ensure that staff understood their KPI’s, their SMART goals and the consequences of poor performance.

Over 95% of managers complied and had the conversations (that was thekey success indicator!), however three months later little had changed apart from a touch more cynicism about the value of HR to the business.

Fortunately the new People and Change Executive understood the difference between a technical and adaptive problem. She recognised that the performance conversation was potentially the most powerful adaptive tool in the business BUT  the performance review was masquerading as that solution.

Over a six month period she led the embedding of a feedback and learning system that has been overwhelmingly embraced by managers and leaders.

Actions and lessons learned

The actions and learnings from the intervention are a great guide for any HR leader or consultant who is serious about making the performance conversation an adaptive tool instead of an administrative process.

1: Leave the performance review alone

Instead of tackling the performance review it was decided to just leave it as an annual process and to worry about innovating it later. Better to focus on resolving the damage from what wasn’t being done, rather than waste time and effort tackling the sacred cow head on.

2: Install a performance partnering system

To provide managers, their direct reports and teams with a simple and consistentapproach to alignment, collaboration and debriefing, three principles were followed:


  1. define performance broadly to include achievement of goals / KPI’s, development of knowledge and skills, engagement and effective relationships
  2. use practical tools such as partnering agreements and action debriefing to align expectations and generate frequent, high quality ‘learn and adapt’ conversations
  3. make it a time efficient and disciplined system that was connected to the real business action


3: Begin with team partnering

The implementation of the performance partnering system began with the Executive Team and then cascaded into all teams through a facilitated coaching process that guided teams to create quarterly ‘clipboard plans’. (These A3 sized performance templates are like mission plans used in high performance units and they literally get everyone on the same page.)

Teams were then coached to holdshort, intensive action debriefs each month and to meet quarterly to refine the next clipboard plan.

The key lesson learned is that business bottlenecks have opened up (resulting in faster delivery times and better service levels) because of better alignment between strategy and team priorities, reduced frustration from the inevitable strategy adjustments, and less friction between teams.

4: Get performance partnering agreements

Managers and team leadersuseda simple alignment tool with their direct reports to define a performance partnering agreement, instead of the usual one way dump of KPI’s. 

At 30 minute monthly ‘speed reviews’, the partners then captured learnings, realigned goals and priorities, and addressed friction points.

The most common observation from managers is that this made feedback and learning part of the normal work pattern rather than an enforced HR system. A comment from a senior Production Manager sums it up, ‘We’ve now got a simple and effective framework to address performance issues immediately rather than letting them build up’.

5: Enjoy less spectating and better alignment

A further key learning has been that instead of teams ‘spectating’ and criticising each time the Executive Team tweaks the business priorities, the performance partnering system has given people a framework to understand the ‘why’ behind the decisions, to realign their priorities and to push learning back to the senior leaders.

No more lost opportunities

In the volatile business world it is essential that your organisation learns and adapts fast, however the traditional performance review can be a hindrance when management relies on this process for feedback and learning.

The performance partnering system is a simple and innovative alternative that aligns people and teams quickly and effectively without the need for the bureaucracy that is often attached to business planning and performance reviews.

The message for HR is that it can play a vital role in developing the power of performance conversations as an adaptive tool, or it can protect or passively administer the traditional performance review.

If HR takes the latter role, then it is not the cynical comments about tick and flick forms and non-compliance that will damage the business, but rather the lost opportunity to boost the ability of everyone to learn and adapt.


About the author

Graham Winter is the best-selling author of 'Think One Team' and 'The Man Who Cured the Performance Review (Jossey Bass)'. He is client solutions leader for Think One Team International and a former three-times chief psychologist for the Australian Olympic Team. Graham can be contacted at www.thinkoneteam.com or graham@thinkoneteam.com

(His next book 'First Be Nimble, How to adapt, innovate and perform in a volatile business world' will be released in September this year)