Do performance reviews even matter when unemployment may peak between 10% and 20%? Isn’t performance feedback a luxury of a robust job market?

I would argue that a worldwide crisis makes performance management more important than ever.

Right now, employees are distracted. They wonder if they will be laid off, if their retirement savings will ever rebound, and if their loved ones will stay healthy. When employees are anxious, it’s easy for them to misunderstand feedback. The current crisis means managers need to communicate with each employee at more frequent intervals. When employees are anxious or distracted, it’s easy for them to misunderstand feedback.

Let’s look at where organizations tend to stumble in the review process so that you can use performance management to effectively lead your team during this crisis. 

Most organizations use online performance management applications. These tools eliminate the practice of rating employees on a scale of one to five on such subjective traits as customer service. These old-school review processes encourage rater bias, which results in an ineffective performance review and arbitrary conversations that accomplish nothing.

The solution for an effective performance review is right in front of you.

Unfortunately, employees still complain that the feedback they receive feels biased or disconnected from their work. Managers continue to view performance management as a time-consuming, box-checking exercise that has little impact on employee performance. Interesting white papers advocating for the removal of the annual review dot the HR landscape. However, many companies that eliminated reviews have reinstated them, reporting that employees feel adrift without solid feedback. 

The solution for an effective performance review is right in front of you. By aligning job duties with corporate or department goals, managers encourage teamwork and foster dialogue about group success and individual contributions. When you train managers to give an effective review that is both direct and compassionate, they can optimize the experience. This is a time for leadership at all levels, which means authentic and relevant communication is critical. 

Employees who think the performance review is fair also believe it is effective. These three actions ensure the best approach to performance management: 

1. Transparently link employees’ goals to business priorities and maintain a strong element of flexibility.
2. Invest in the coaching skills of managers to help them become better arbiters of day-to-day fairness and givers of compassionate feedback.
3. Reward standout performance for some roles, while also managing converging performance for others.

Great management skills are not a luxury. Unfortunately, during economic downturns, organizations routinely cut management training to save money in the short term. The companies that have resisted this practice have historically been the highest performing upon economic recovery. 

Don’t kill ratings. In the quest to take the anxiety out of performance management, it is tempting to do away with rating systems. Yet companies that try this approach will struggle to help employees know where they stand, why they are being compensated at a certain level, what would constitute fair rewards for different levels of performance, and which guidelines underpin incentive structures. Banks and credit unions can forget about a sales culture or a high performing organization if employees are unclear on these points. In a recent McKinsey & Co. study, just 16 percent of respondents at non-differentiated compensation companies deemed their performance management system effective. The performance planning and review process require too much time for all concerned if employees believe it ineffective or unfair 84% of the time. 

The many well-intentioned performance management experiments now underway run the risk of falling short unless a sense of fairness underpins them in the minds of employees. At the risk of oversimplifying, we suggest that busy leaders striving to improve performance management listen to their employees. They have a pretty good idea about what fair looks like: “Just show us the link between what we do and what the company needs, make sure the boss gives us more coaching, and make it all pay.” These have always been the keys to corporate success. Using these keys effectively during the COVID-19 era is critical to productivity and sustainability.

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