NEW YORK – Performance reviews are a pain point for employers and employees alike. They cost managers an average of $3,000 per year, per employee, according to a survey of Fortune 1,000 companies conducted by the Corporate Executive Board (CEB).
Unfortunately, for many employees, they are seen as inaccurate and a waste of time. But new research from Columbia Business School finds that if the evaluations are conducted in an individualized manner—based on comparisons to an employee’s past performance rather than to their peers’ performance—they are far more likely to be seen as fair, which has been shown to improve employees’ productivity and morale.
“Our findings show that, simply put, the process matters,” said Joel Brockner, Phillip Hettleman Professor of Business at Columbia Business School. “Oftentimes, the performance review process can be viewed as uncomfortable, unfair and uninspiring. In order to improve upon the fairness factor and thereby better ensure employees accept the feedback, managers must acknowledge the individual identities of their workers and their specific contributions to the organization over time.”
About the Research
In the paper, entitled How Temporal and Social Comparisons in Performance Evaluation Affect Fairness Perceptions, Brockner and his co-authors, Jinseok Chun, PhD student at Columbia Business School, and David De Cremer, Professor of Management Studies at Cambridge University’s Judge Business School, use two common approaches to appraising employees to evaluate whether one approach is received better than the other.
Temporal comparisons are modeled on a “me now, versus me in the past” dimension. Social comparisons measure performance relative to peers, such as “you are currently doing better/worse than your colleagues.” Using these two frameworks, the researchers find that temporal comparisons yield better results because they are perceived by employees to adhere to principles of interpersonal fairness, including respect and dignity, and to be more individualized. This individualized approach, in turn, signals to the employee that they are important and of value to the evaluator and renders them more open to positive and negative feedback.
In the case of social comparisons, on the other hand, because they often lack specific details about individual performance, it can give the impression that an employee is being treated like “one of the masses” and lead them to be less receptive to the feedback, whether it is positive or negative.
Key Takeaways for Managers
The results suggest that one way managers can enhance employees’ perceptions of fairness in performance evaluations is to ensure that at least some aspects of the evaluations consist of temporal comparisons.
Furthermore, when organizations treat their employees in an individualized way, in contexts other than performance evaluations, it may help the employees develop more positive attitudes towards their jobs, which, in turn, could result in higher productivity, increased morale and bottom-line growth.
While the research shows temporal comparisons yield a higher receptivity to feedback in employees, there might still be some situations in which managers prefer to use social comparisons. For example, managers may rely on social comparisons to structure an equitable rewards system (e.g. salary increases, bonuses, promotions).
Social comparisons can also be used to increase individual effort through competition. Ultimately, managers need to assess the trade-off between the costs and benefits associated with social comparisons.
To learn more about the cutting-edge research being conducted at Columbia Business School, please visit www.gsb.columbia.edu.
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