The Science Behind Using Data in Employee Performance Reviews

mployees don’t leave organizations, they leave managers. This might be due to some kind of bias or discrimination they feel their manager has against them, or maybe they do not have matching expectations. Employee performance reviews or appraisals can become a bone of contention within a workplace, because reviews and ratings affect pay hikes and bonuses. When subordinates receive bad performance reviews or poor ratings, the first thing they think and say is, “Well, they don't like me, so of course they gave me a bad score.”

According to a Development Dimensions International survey, 57% of employees say they left their job because of their manager, 14% left multiple jobs due to their manager, and 32% say they seriously considered leaving their job because of their manager. These figures make it abundantly clear that organizations should take employee performance reviews seriously to ensure that there is accountability and transparency.

This is why performance reviews based on data have played such a large role in the modern, successful workplace. Managers and HR managers who use data to review employees remove biases and subjectivity, which is a more fair approach. Furthermore, organizations can justifiably claim no prejudice or bias was made towards employees based on race, gender, age, or other factors to avoid lawsuits and other legal cases. It may be impossible to prevent disgruntled employees, but you can ensure every employee is treated fairly and equally.

Why Performance Reviews Matter

Over the years, performance reviews have taken a big hit. Many organizations are starting to question their effectiveness, as are employees and managers. A Leadership IQ study revealed that of the 48,012 managers, employees, and CEOs surveyed, only 13% said they think their company’s employee appraisal system is useful. Of the CEOs, only 6% feel their system is useful. To make things worse, 88% say their performance review negatively impacts their opinion of human resources.

But this doesn’t mean performance reviews are a bad thing. It simply means that they aren’t being implemented correctly. According to another Leadership IQ survey, only 29% of the respondents said they know whether their performance is where it should be. That percentage should be at 100 if managers are giving proper feedback about their employees’ performance.

Lack of communication about performance is also bad for an employee’s mental health. When employees don’t know if they’re doing something right, they can feel lost and frustrated, especially those working from home. They might feel like their colleagues working in the office with direct contact with management may have a leg up on them. Without that feedback loop, uncertainty and anxiety can develop. Mark Murphy, the founder of LeadershipIQ and a New York Times bestselling author, says it best, “The data is quite clear that the more an employee has clarity about their performance, the more inspired they are.”

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Why the Current Performance Review Process is Biased

The typical performance review goes as follows:

• The employee fills out a form regarding their accomplishments and what they have to improve upon.
• The manager assesses their performance, gives feedback, and rates their performance based on their expectations.

While this codified rating system gives the appearance of an objective evaluation, this just isn’t true. People’s assessments of other people are inevitably imperfect and biased. With questions that include, “How did the employee’s performance meet your expectations?” and “What were their accomplishments?” and other ambiguous questions, managers are rating employees based on personal expectations.

Without structure, studies have shown that gender, race, and stereotypes are relied upon to make decisions instead of a system that’s applied across all employees. That’s not to say managers are racist or sexist, but implicit bias does creep in for anyone. We may think we can trust our instincts when it comes to being fair and consistent, but our impressions are often imperfect and compromised.

The Modern Performance Review

With all the data we have access to, there is no reason for performance reviews to be subjective anymore. The traditional performance review was held annually, was a one-way conversation, reviewed past performance, had little to no transparency, was based on subjective opinions, and resulted in a rating.

Now, managers should come equipped with data from an array of sources, such as task completion, performance, talent review ratings, 360-degree feedback, goal progress, one-on-one notes, and much more. There should be no personal opinions in every statement. It should be strictly fueled by data. The modern performance review should be based on rich and real-time employee data, held monthly/quarterly, be transparent, and should review recent performance.

While data-driven performance reviews are certainly effective, there needs to be clear criteria for how performance is measured. Otherwise, the data is useless. Employees need to understand what constitutes good performance and bad performance. According to the authors of an article published in Harvard Business Review, “When you first agree to the criteria used in the assessment and then you make the evaluation, you are less likely to rely on stereotypes and your assessments are less biased.”

Employee performance criteria should measure impact, define success, prove results, and determine what’s next. By adding qualitative context to performance, managers can better interpret the data. Additionally, to provide emotional support to employees, managers can focus on the positive findings and opportunities to grow rather than dwell on the negative.

The Future of Employee Performance Reviews

With so many people out of the office, data is being relied on more than ever. Managers shouldn’t rely on their old biases and assume that top performers are doing great and bottom performers are struggling. It could be quite the opposite. Maybe those that struggle with social anxiety are flourishing working from home and those social butterflies are struggling. The only way to know is by looking at performance data.

But how do you locate all this helpful data for evaluating employees and bring it all together? Well, we have some great news for you! With MetaSpark, AI automatically pulls measurable employee data from all your systems and puts it into one dashboard. No manual work and no data entry. You’ll be able to measure your goals and OKRs in real-time. So, stop making guesses about performance, and start relying on data for employee performance reviews.