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The hidden opportunity cost of performance reviews

Source | Linkedin.com  |  BY:DIdier Elzinga . ceo @ culture Amp

There’s little doubt that performance reviews as we know them are dying. For too long, people have been forced to look backwards and try and justify what they have been doing for the past year. With little clarity over the outcome of these conversations, inevitably no one is happy with this process. People loathe their performance discussions and expect the process to hurt – and it does.

The hidden costs of performance reviews are huge

Historically, organizations have combined evaluating their people with giving developmental feedback. In one conversation, they have tried to review someone’s performance, give them feedback, help them get better, work out if they’re actually any good at their role, and set their salary. That’s a lot of important things to put on one conversation.

One of the biggest problems with this approach is that there’s a tendency to respond to the evaluation component more than the feedback. It is extremely stressful to have someone say whether they think you’re good at your job, particularly when there’s a lot at stake. If the person receiving the feedback thinks the discussion is tied to a promotion or pay rise then it becomes an even more loaded exchange. This can trigger a fight or flight response.

This in turn affects how the feedback is received. A person needs to have an open mind to receive feedback effectively. They need to allow themselves to be vulnerable so they can take it on board and learn something. But this is difficult to do if the feedback is linked directly to their salary. That often results in a very defensive mindset which makes achieving any constructive development even harder.

This entire process creates a huge amount of anxiety – the people giving the feedback are anxious, the people getting the feedback are anxious. The anxiety is a huge cost for the organization, not just in monetary terms but also in terms of time.

We need to discuss the opportunity cost of performance reviews

The real question organizations need to ask themselves is whether their performance reviews are as valuable as the cost, time and effort that goes into them.

Readon….

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