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4 Things Leaders Misunderstand About Performance Reviews Workers crave feedback, but feedback loops often go wrong.

By Rashan Dixon

Opinions expressed by Entrepreneur contributors are their own.

10'000 Hours | Getty Images

Once a workplace staple, the performance review is on trial. From startups to large firms like Accenture, leaders are wondering whether formal performance reviews are worth it.

The data doesn't paint a rosy picture. When management research firm CEB studied the subject, it found just one in 20 managers was satisfied with how his company conducted performance reviews; only one in 10 HR executives believed performance reviews produced accurate information.

The problem, though, isn't with performance appraisals themselves. Almost universally, the people I've worked with want to know where they stand at work. For their part, companies want to help workers see their strengths and shore up their weaknesses. No, the problem is that company leaders often forget four important facts about them:

1. Role-specific skills are only part of the picture.

No matter how technical a role is, it takes "soft" skills as well. A JavaScript developer with weak verbal communication skills will struggle to work as part of a team. It's just as important for an architect to be prepared and punctual for her client meetings as it is for an account manager.

Take a "corporate athlete" approach to performance reviews. Management consulting firm Credera encourages every team member to develop his or her expertise in areas ranging from client service to presentation skills to writing to business development. Although the company does evaluate an employee's job-specific skills, Credera's performance evaluations focus first on building well-rounded professionals.

Related: The 10 Unique Soft Skills Employers Desire in New Hires

2. Reviews should be a conversation, not a confrontation.

No phrase puts a scare in employees quite like "performance review." But stressful interactions with management don't help workers grow, and they certainly don't help with employee turnover. That's why apparel company GAP recently ditched its formal review process for an informal, undocumented one that encourages employees and leaders to meet 12 times over the span of a year.

You don't have to throw out your performance rubrics and documentation entirely, but don't make the process more stressful than it needs to be. Ask employees to schedule their own reviews or initiate performance conversations at least once a quarter. Consider walking or lunch meetings, which tend to be less intimidating than face-to-face reviews. Dress casually on review days so employees don't feel like they're sitting down for a second job interview.

3. Leaders need feedback from below.

Too often, performance reviews run one direction: from the top down. Unfortunately, that leaves out the person who needs feedback the most: the leader. Factory-floor employees see how the company's policies play out in practice, meaning they have insights that those in the ivory tower need for better decision-making. That feedback can be tough to hear -- but as one restaurateur learned, it's key to building a healthy company.

Through what Jonathan Neman described as a "brutal" performance review, the Sweetgreen co-founder learned he was standing in the way of the culture he wanted to create. After interviewing 17 people close to Neman, his executive coach delivered a four-hour presentation. Neman's takeaways? Get more sleep, don't fear failure and give team members more autonomy. Despite his discomfort, Neman was grateful for the eye-opening experience.

Related: 6 Tips for Hearing Tough Feedback

4. Carrots work better than sticks.

If a team member's performance truly is a problem, put her on a performance improvement plan. Identify shortcomings and growth steps together, and give the employee three or six months to show improvement. What if that person's performance is still below par? Tell her if termination is on the table, but beware that pay cuts and demotions may make the problem worse. Punishing someone who's making a good-faith effort to grow is demoralizing at best.

Related: 'Seeing Someone Cry at Work Is Becoming Normal': Employees Say Whole Foods Is Using 'Scorecards' to Punish Them

Instead, preempt performance problems through rewards. Think beyond pay bumps: Willis Towers Watson research shows that while 99 percent of employers incentivize performance with pay increases, just 40 percent believe they're effective. Ask top performers whether they'd prefer better benefits, advancement opportunities or additional paid time off. Use a rubric to determine which workers qualify to ensure your reward system doesn't produce a perception that some employees receive special treatment.

Everyone craves feedback. Performance reviews are meant to provide it in a meaningful, collaborative and actionable way. Done poorly, however, review programs worsen disengagement and waste company time. Just don't show yours the door before giving it a chance to improve.

Rashan Dixon

Entrepreneur Leadership Network® Contributor

Co-founder of Techincon and Senior Business Consultant for Microsoft

Rashan Dixon is a senior business systems analyst at Microsoft, entrepreneur and a writer for various business and technology publications.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

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