If you work in HR or if you are a manager with direct reports, you have probably pondered these questions more than once: What is the purpose of performance reviews? What should be their goal? And is it really necessary to have them at all?
In order to answer those questions, you need to answer another one first: What kind of leadership culture does your company have - and how well does this culture serve your organizational purpose? Depending on your answer, the importance and goal of performance reviews may vary.
1. AUTOCRATIC leadership cultures
If your organization is very hierarchical, your leadership culture is probably autocratic: Leaders make decisions and expect subordinates to follow orders. This works well in organizations where a clear separation of decision makers and operators is important, e.g. the military or manufacturing companies in which stable processes are more important than innovation.
In those companies, the sole purpose of a performance review is to check if an employee's past performance meets the requirements the company has defined for this role. If it does, there is no need to take action. If it doesn't, the superior decides if they believe that instances of unsatisfactory performances were either minor or isolated - or if the job holder is not up to the assigned task and needs to be replaced by someone more suitable.
2. BUREAUCRATIC leadership cultures
In bureaucratic organizations, responsibility is not in the hands of a few people on top but rather pre-defined in very specific job roles: As a job holder of a given role, you know exactly what you can decide on your own and in which cases you need to get permission from your superior. As in autocratic cultures, innovation, change, and employee engagement are not encouraged: This would bring the carefully pre-defined roles in disarray. Most government agencies and public service organizations are set-up bureaucratically.
Performance reviews in those environments help organizations evaluate whether the job holder has complied with the specific rules of their assigned role. The goal is to ensure that everyone adheres to those rules and to repeatedly remind employees to stick to the tasks and responsibilities of their positions.
3. TASK-FOCUSED leadership cultures
Many multinational corporations are task-focused: They have matrix structures where specific tasks or task groups (i.e. projects) are defined and prioritized. Managers then try to find the right people within the organization - but across business units - to assemble teams capable of accomplishing the set goals. Individual employees have a certain space for engagement and self-fulfillment because they can proactively apply for internal project roles and broaden their experience.
In task-focused leadership cultures, performance reviews are not entirely company-centric. Instead, by evaluating an individual's past projects, managers also identify individual strengths and interests of the employee to determine which future projects might be most suitable for them and which of the employee's skills would benefit from additional training.
4. PEOPLE-ORIENTED leadership cultures
Across industries and business areas, organizations increasingly need creativity and innovation to compete and, in the long term, survive. To foster fast and successful innovation, a people-oriented leadership culture is indispensable. For the benefit of organizational success, companies strive to enable their employees to achieve their full potential. In order to do that, work itself needs to be redefined, from a fixed set of tasks and responsibilities predefined by top executives to an organic relationship between organizational and individual needs. Both sides, organization and employee, need to strive for a balance between the two: The organization provides an environment in which employees can realize their needs and wants while employees are committed to the organizational needs and wants.
Performance reviews in people-oriented leadership cultures therefore, don't have the goal to control performance but to enable and drive it. More than anything else they are self-assessments in which the employee reflects on what their individual needs and wants are and which of them are most important to them. Then they discuss with their superior how they can use their preferences for the benefit of the organizational purpose.
In all of the above scenarios, performance reviews can be meaningful and serve a real purpose. And many organizations have leadership cultures that are not 100% autocratic or task-focused or people-focused. It is worth evaluating what your leadership culture looks like and if it's still in synch with your company's strategy. Only then will you be able to determine which purpose your performance reviews should serve - and if they are currently doing that.
If you would like to read more about the topic of performance reviews, then download the Premium eBook The power of Initiative, Challenge and Enthusiasm by Robert J. Engelbrecht. Also, have a look at our website bookboon.com where you'll find many more eBooks.