Good morning!
The end of the year is quickly approaching, and for many companies that means annual performance reviews—and all the agony that comes along with them.
Criticism of performance reviews is certainly not new. But they’ve come under renewed scrutiny as organizations and their HR teams evolve their talent practices.
One in four employees believe their performance reviews were negatively affected by their supervisor’s personal biases, according to a recent survey of more than 1,000 full-time workers from Syndio, a technology company that helps employers including Walmart and Salesforce analyze race- and gender-based pay gaps. Asian employees were 54% more likely to perceive negative bias than white employees, and LGBTQ+ workers were 35% more likely to perceive bias compared to their non-LGBTQ+ peers.
This perceived bias can create a domino effect for both the employee and the company.
Performance reviews often inform an employee’s bonuses and promotions, meaning a poor rating can seriously impact their career growth. “If potential bias exists, it's impacting more than an annual raise or bonus payout,” says Katie Bardaro, Syndio’s chief customer officer. “It can have lasting detrimental effects on the employee's lifetime earnings.”
As for the company, performance reviews perceived as biased can also hurt employee morale, tanking engagement and worker retention. “Humans are hardwired for fairness, so if there's any concept that there's a lack of fairness there, they're going to look elsewhere,” Bardaro says.
Both workers and managers want more sunlight on promotion decisions based on performance reviews. Forty-three percent of employees believe their organization is opaque about promotions, and 36% of managers and leaders agree that promotions should be more transparent, the same study found. Yet 60% of companies still follow the “status quo” performance rating process, or annual reviews conducted by a limited scope of reviewers, such as managers or senior peers. Large organizations, employing 15,000 or more workers, were most likely to rely on annual reviews, with 73% reporting taking part in the practice.
Making performance reviews more frequent can help make them more equitable. The tech sector is the most likely to conduct reviews more often, with 52% doing so, including Google, Adobe, and Netflix. Manufacturing and healthcare, on the other hand, were the industries least likely to adopt more frequent reviews, at 23% and 30% respectively.
Bardaro recommends that in addition to formal performance reviews, managers and employees engage in more frequent informal check-in conversations.
“Reviews are very time intensive,” says Bardaro. “[Establishing] more quick hit performance conversations more regularly is better not only for the employee, as we've seen from our survey, but also for the organization. It's less distracting from the work that has to be done to drive the business forward.”
“Everyone just wants to know they're on the right path,” Bardaro adds. “If you're waiting all the way until the end of the year to know that, it's wasted months of you potentially being totally on the wrong path.”
Paige McGlauflin
paige.mcglauflin@fortune.com
@paidion
