The Psychologically Safer Alternative to Performance Reviews

If the annual performance review period brings about stress and dysfunction in your workplace, you're not alone. Despite studies highlighting the inherent unreliability of people in objectively rating each other's performance due to biases, leaders continue to be tasked with assessing team members.

Unsurprisingly, the subjective and unjust nature of these performance reviews can destroy trust and psychological safety in teams. For example, new international psychosocial standards note that people can experience the psychosocial risk of inadequate reward and recognition when:

• Formal performance reviews and development conversations are limited.
• There is an inequity in rewards and recognition due to favoritism or discrimination.
• People are not being paid fairly.

Here's the proof: Our research at The Leaders Lab has found that inadequate reward and recognition can leave people feeling demotivated, disengaged, and less willing to go the extra mile. It can also create a negative workplace culture.

So, what can workplaces and leaders do to make performance reviews safer and more effective?

The Corporate Leadership Council has found that when leaders focused on weaknesses in formal performance reviews, performance declined by an average of 26.8%. In contrast, when managers focused on strengths, average performance improved by 36.4%. Building on this idea, Marcus Buckingham and his colleagues have found that the best performing teams score high on three factors:

• The mission of our company inspires me.
• I have the chance to use my strengths every day.
• My co-workers are committed to doing quality work.

Based on this research we recommend that workplaces and leaders turn performance reviews into psychologically safe strengths-focused development reviews by reflecting on the following with team members:

• What’s working well? How are they delivering value that supports your workplace’s vision, strategy, and values? Which strengths are you drawing on? Try to put 80% of focus here as these are the neurological strengths someone has to build on.
• Where are they struggling? Where are they struggling to deliver value that supports your workplace’s vision, strategy, and values? Which strengths could they draw on? Try to put 20% of focus here as these are the neurological weaknesses that may require considerable investment of time, energy, and effort to minimize.
• What are they learning? What are they learning about using their strengths – when they are underplayed, overplayed, and just right — to deliver value that supports your workplace’s vision, strategy, and values? Celebrate the learning as much as any outcomes as this is what they are most likely to be motivated to do better on. Note the areas of learning that need to be prioritized as part of their ongoing development.
• What next? Going forward, how might they use their strengths to deliver value that supports your workplace’s vision, strategy, and values? Pay attention to what they “want to” try next. Then, explore the job and development opportunities that can be offered to recognize and reward their work.

Remember: Clear is kind. While providing feedback people may find hard to hear can feel uncomfortable, there is nothing kind about robbing people of the opportunities they need for learning and growth. Being honest, direct, and clear is a way to show respect for each other and build psychological safety.

And if the process or conversation becomes overwhelming for people, consider slowing it down, taking a break, or having a third-party help. Growing together can be hard. We don’t have to do it all at once or all alone.

Click here to listen to a podcast with practical examples of how the best leaders thank their teams.