Nearly every survey on the subject of performance reviews reports dismal results. They waste time, give false information, create tension—even help plaintiffs’ lawyers—anything but improve performance, accountability, and employee engagement. 

Paul Falcone has been a human resources executive for 20 years. His career has included positions as vice president of human resources (HR) at NBC Universal, Inc., Nickelodeon Inc., and other companies. A distinguished speaker and writer, Paul recently co-authored the book, The Performance Appraisal Tool Kit

JATHAN JANOVE: Why do performance reviews produce such dismal results? 

PAUL FALCONE: Three reasons: 

  1. They’re used for the wrong purpose—as a mechanism to justify an employee’s merit increase. They otherwise have little meaning.
  2. The template has typically been passed down from one generation to the next with little forethought. Dumbed-down and overly simplistic “performance factor” descriptions become little more than a “fog-the-mirror” exercise. 
  3. The organization’s leaders fail to use performance reviews as an assessment of how their human capital asset is performing. 

JJ: Should we get rid of the performance review? 

PF: No. 

JJ: Why not? 

PF: Because you need a consistent, standard measurement over time. Should you simply assume that everyone is doing their best and leave it at that? Or should you follow the “what gets measured gets managed” rule that allows for differentiation and measurable improvement? Some form of assessment is needed to tell employees where they stand in relation to performance expectations and their peers. 

JJ: Who are the potential beneficiaries of an effective performance review system? 

PF: There are three principal beneficiaries: 

  1. the employee who has an opportunity to feel a sense of purpose and make a difference while feeling recognized;
  2. the supervisor who can channel the efforts of others toward shared goals and enjoy the “gift” of helping others grow and develop in their careers; and
  3. the organization’s leaders who can identify performance patterns, trends, and opportunities for improvement over time. 

JJ: How would an organization’s leaders use performance reviews in such a way? 

PF: Senior leaders should look to the annual performance review “culmination” as a living, breathing snapshot of their organization’s human capital performance at a particular point in time. A performance review can be used as a human capital balance sheet. At this point in time, and in light of the challenges our organization is facing, what percentage of our employees are meeting, exceeding, or falling below expectations? 

JJ: What steps should employers take to make a performance-review system effective? 

PF: Decide on the appropriate appraisal template. Does it fit your company’s circumstances? Are you in start-up mode (in which case your form should probably emphasize innovative or creative behaviors)? Are you in growth mode (in which case the form should zero-in on behaviors that improve speed, efficiency, and scalability)? Or are you a mature company (in which case the focus may be on compliance, protection, and preservation of market share)?  

The template should generally change every year or at least every other year to reflect the immediate priorities and challenges that your company is facing. That’s the whole point! Just as companies change and morph so quickly these days to adapt to new market conditions, your appraisal template needs to reflect those same challenges. 

Next, examine the content. How do you best describe the desired behavior? For example, if you say “understands procedures,” it may not be hard to give all members of your team “fives.” However, if you say “sustains peak performance, exhibits in-depth product knowledge, and serves as a subject matter expert,” the ratings will change. This not only fixes the traditional “grade inflation” problem, but also sets the bar for individual performance much higher. 

JJ: How do you ensure consistent ratings across the organization? 

PF: It’s a constant challenge. When I worked in HR at a large TV network, one senior executive told me, “If all my people are not ‘fives’ or at least ‘fours,’ they don’t belong on my team and should be fired.” But another executive said, “I believe that most of my people should fall under the ‘three-category’ in overall score, but my counterparts in the motion picture, home entertainment, and cable TV groups award ‘fives’ pretty regularly, so my guys will suffer if I’m honest.” 

I recommend using a “Rater Consistency Tool” that outlines the differences between “fives,” “fours,” “three (a)” (meets expectations plus), and “three (b)” (meets expectations minus). The goal is to map those category definitions and initially place some employees in the boxes that everyone can agree with, and work from there. 

For example, I persuaded a top-level executive of that TV network to sit with heads of various divisions, all of whom had the opportunity to get on the same page in terms of what those overall scores represented. From there, it rolled down to calibration exercises within each group, with leaders at all levels actively discussing who fits in a particular score category and why. 

The goal is global consistency, agreement, and understanding that funnels down and applies to the smallest pockets of employee groups. 

JJ: Any other advice for companies desiring to achieve human capital return on investment through performance reviews? 

PF: Remember that performance is a moving target, and set your goals with an eye towards ratcheting-up individual performance over time. Review enterprise-wide results in light of the defining challenges your company faced that year. And use the performance review metric to strengthen your reputation as a turnaround expert in the area of leadership and human capital performance.

If you have examples of effective performance review practices, please let me know. I’m supplementing the best-practices research I did for HR Magazine, reflected here. I’m also developing a best-practices performance review checklist and would be happy to share it with you once it is completed. 

Paul Falcone is the author of The Performance Appraisal Tool Kit (AMACOM 2013). He can be reached at