When companies seek our people management solution, we always ask about the purpose of the review: (i) decision-making (promotions/movements) or (ii) employee development and performance improvement? The answer is almost always the same: "both."

In this article, we summarize our opinion on the matter. For Qulture.Rocks, these two objectives should be addressed in distinct processes, avoiding potential conflicts and maximizing results.

First and foremost, reviews for decision-making (DM) and growth and development (GD) have different target audiences.

🟣 DM's customers are the HR and management of the company: it is a tool to identify which employees the company should prioritize in allocating scarce resources, such as bonuses, equity, promotions, and training.

🟣 On the other hand, GD reviews customers are the employees themselves: they should receive constructive feedback and inputs that assist them in their professional development, career planning, and personal growth. Studies, as mentioned by Daniel Pink, show that intrinsic motivations, such as personal development, are more powerful than external financial rewards, such as bonuses.

This distinction between the objectives of DM and GD is fundamental for effective review processes that cater to the specific needs of each stakeholder group.

If clients have different needs and goals, it does not make sense to create a single review process to serve both. It would be like manufacturing a car to cater to luxury markets and police services, adding sirens to a Mercedes and electronically adjustable leather seats to a police vehicle. As advocates of User-Centered Design (UCD), we seek to optimize our tools and processes to better meet the needs and extract value from each stakeholder group.

The theory behind reviews also points to the separation of GD and DM processes. There are many simple and numerous reasons for this distinction:

🟣 The first reason for separating GD and DM processes is that when it involves financial rewards and promotions, employees tend to close their ears to development feedback. If feedback is given before communicating the bonus or promotion, employees often become more concerned about the expectation of receiving a financial reward than absorbing developmental information. On the other hand, if feedback is given after announcing the bonus or promotion, employees may be too euphoric or upset to listen constructively to feedback as they will be focused on celebrating or dealing with the news received. This interference of financial rewards can hinder the effectiveness of the development process and make feedback less effective. (Source: Bock, 2015);

🟣 The second reason to separate GD and DM processes is that when employees know that their feedback will be used in decision-making, they tend to provide highly biased or sanitized inputs. This happens because they may fear harming their colleagues or wanting to strategically influence the outcome of decisions by offering less accurate feedback. Concerns about how feedback may affect the review of their colleagues can lead employees to be less honest or omit important information. This bias in review can impair the quality of data collected and negatively affect resource allocation and promotion decisions since performance review should be based on objective and unbiased information (Source: Smithers, 1998);

🟣 The third reason to separate GD and DM processes is related to the presence of absolute ratings, whether numerical or textual, such as "5" or "Excellent." These ratings can impair the quality of feedback and inhibit open reception by employees, even when the review is only intended for development (GD) (Source: Pulakos, 2005);

🟣 The fourth reason is that the separation of DM and GD review processes is essential due to the different needs of those involved. When the review is used for decisions such as promotions and bonuses, employees tend to focus only on the reward, neglecting to absorb constructive feedback. Additionally, when feedback is used for decisions, there may be biases and lack of transparency. Reviews focused on development, on the other hand, aim to provide constructive feedback for the growth of employees without interference from rewards or punishments. Separating the processes allows each to be optimized to meet specific objectives, resulting in more accurate and focused decisions on both individual growth and organizational progress.

Clarity regarding the purpose of the review process is essential. We recommend clearly defining the desired objective and, if possible, keeping only one purpose. If the purpose is dual (GD and DM), take precautions to avoid contamination between the objectives.

Next, we will present specific tips for each purpose: (i) GD, (ii) DM, and (iii) Mixed. These guidelines will help optimize the process, ensuring that each objective is achieved effectively.

🟣 It is crucial to clearly separate the questions and topics to be explored in the self-assessment, the superior's assessment, and the peer assessments. Each type of reviewer has a "specialty" in review, ensuring a comprehensive and objective approach to the employee's performance.

🟣 The superior can play two distinct roles in the review: a) as a consolidator of feedback, selecting and curating the most relevant inputs for the employee based on all contributions received from peers and subordinates, or b) as another element providing developmental inputs, common in companies that compare reviews from different reviewers. This approach ensures a more comprehensive and valuable assessment for the employee's development.

🟣 Superiors should lead discussions about the employee's achievements, provide feedback related to improving results, and identify priorities for the employee's development.

🟣 Peers should discuss how the reviewed employee can improve at work, considering the team's context.

🟣 It is essential to avoid having the self-assessment address the same competencies as the reviews from other groups when competencies are used in the process. Studies show that scenarios where the employee overestimates or underestimates themselves bring suboptimal results for the development of the reviewed employee, leading to demotivation or complacency. Differentiating the competencies addressed in each review can provide more balanced and valuable perspectives for professional growth. (Source: Smither, 1998);

🟣 When using competencies, it is recommended to avoid the use of numerical ratings and opt for simple scales, such as binary scales, where it is possible to identify whether the employee is "mastering" the behavior or if there is room for improvement. Scales with many ratings lose their relevance since it is not necessary to compare employees with each other, but to provide inputs for individual development. This way, reviews become more focused and useful for the continuous improvement of employees;

🟣 It's okay to call the final meeting of the feedback process.

When it comes to decision-making, the objective of the process is to create sufficient differentiation between employees. Here, we will not discuss the merits of using competencies as a proxy for performance, nor the use of goals as a proxy for performance.

🟣 Adopt a quantitative scale to enable differentiation between comparable employees.

🟣 Remember that different areas have different metrics for review, such as measuring salespeople by sales in dollars and engineers in multidisciplinary teams. Adapting a single process would be ineffective. Choose relevant and specific metrics for each role.

🟣 If the objective is decision-making, avoid reviews with multiple inputs as they can hinder collaboration and teamwork. People can manipulate the results for their own benefit. Opt for more direct and objective reviews.

🟣 Avoid calling the final meeting of the feedback process a "feedback" meeting, as it is actually a meeting to communicate results. Calling it that way can create misguided expectations and harm the atmosphere when the focus is actually on constructive feedback.

🟣 It is crucial to clearly define which questions will be used exclusively for development purposes (GD) and which will be focused on decision-making (TD). Additionally, it is recommended to isolate inputs from coworkers only for development-related matters, ensuring objectivity and effectiveness of the review process for both purposes.

🟣 It is essential to include questions in the review that provide decision-makers with clear information about various relevant aspects of employees' skills, such as delivery, cultural fit, and potential.

🟣 It is recommended to hold two separate meetings, as Google does, to communicate the results of each objective: a first meeting to announce the decisions made, such as promotions and bonuses, and another one later, if possible a month or more afterwards, to promote feedback exchange and development discussions among employees.

🟣 Communicating ratings to employees should be a careful decision, as it can generate different reactions. Those who receive higher ratings will be happy, while those at the lower end need to be unequivocally informed about their unsatisfactory performance. However, employees rated as "average" may not have reasons to be happy unless the company does an exceptional job of convincing them that being a median talent in an organization with so many qualified professionals is also a significant achievement.

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