This article is based on research for our recent eGuide, A small business guide to implementing employee performance reviews.
With mid-year review season already underway, there’s probably more than a few managers out there that have lost hours (or worse, days) to outdated performance review systems that seem to be singularly designed to suck the life out of everyone involved in them.
We heartily believe that performance reviews don’t have to be that way (and, in fact, they can be an integral part of your employee engagement), but it got us thinking about how they came about in the first place.
The full episode, The rise and fall (and rise) of performance reviews, also includes an exclusive interview with Sonia Boyle, vice president of human resources at GE Canada, and tips for employers and employees alike for getting the most out of your next review.
But in the meantime, here’s a taste: a (brief) history of performance reviews.
While there are elements of the performance review system that date back to ancient Egypt, performance reviews really started in the 19th century, during the Industrial Revolution.
The earliest adopter of formal appraisals was the military. There, they date back to 1813 and were essentially used to identify problematic soldiers and potential officers though an incredibly descriptive and subjective ranking system. Army general Lewis Cass’s reviews, for example, ranked soliders with phrases like “a good-natured man” and “a knave despised by all.”
While a few bigger companies were ahead of the trend (Lord & Taylor, for example), reviews didn’t really catch on in the business world until after World War Two.
By the 1950s, the idea of performance assessment was a pretty integral part of management. It was about sorting workers – especially when jobs were in shorter supply and job seekers were plentiful. It brings a great Harvard Business Review quote to mind: “When human capital was plentiful, the focus was on which people to let go, which to keep, and which to reward.”
In the 1960s, thinkers like Douglas McGregor were exploring employee engagement and goal-setting, laying the groundwork for the development of employees.
But that kind of stopped short in the 1970s, when high inflation rates and other factors led companies to redirect their focus back toward compensation. The term “performance management” was coined by Aubrey Daniels at this time – systems geared towards accountability and ranking, with star performers rewarded and low performers fired.
Then, in the 1980s and ’90s, talent shortages at various points in time pushed the needle back toward employee development. During these periods, there simply wasn’t enough employees to just be firing the low performers.
By 2000, companies were again responding to tight budgets and leaner management systems, again moving towards ranking and systems that focused on accountability and performance.
But that would all change by 2010, when companies began turning their back on traditional performance reviews entirely. They began realizing how much everyone – managers and employees – dreaded the performance review system. And the numbers seemed to back this sentiment. A report by CEB, for example, estimated that faulty performance review processes could cost a 10,000-employee company as much as thirty-five million dollars in lost productivity.
The reaction was somewhat knee-jerk, with a lot of companies abolishing reviews altogether. Adobe began dismantling its review system in 2012, followed by Deloitte, Microsoft, and many others. And while virtually every news source had a big flashy title announcing the death of performance reviews, it was really more of a revolution.
Companies that had eliminated their performance management systems were really just switching to a different way of delivering feedback. While the old systems were all about looking back, the new systems are all about looking forward. It’s essentially a shift from performance management to performance development.
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