Why You Shouldn't Tie Performance Reviews to Goals
When it comes to annual performance reviews, many managers’ first instinct is to focus on employee’s goal performance. While goal performance should be taken into consideration, it shouldn’t be directly tied to review outcomes.
It’s important to realize the purpose and place of goals within your business. Well thought out goals support the larger strategic plan and push companies in the right direction.
However - and this is the crucial takeaway here - goals should represent ideal outcomes, NOT basic expectations for the people they include.
Basing performance reviews on the completion success of goals can set you, your teams, and your entire business up for failure. In fact, tying performance reviews directly to the completion of goals could have serious negative long-term effects and reduce the impactfulness of future goals.
Before we dive deeper into the role goals should play in performance reviews, it helps to have a better understanding of goals in general.
What’s the purpose of business goals?
Where do you want to be within a specific timeframe? What are the steps that your company, teams, and individual employees need to take to get to that point? Individual goals ultimately add up to a bigger picture.
Goals should do 3 things.
1. Measure success
Hopefully, any goals you set are following the SMART goals system (Specific, Measurable, Achievable, Relevant, Timely).
The ‘measurable’ aspect is critical. A lot of the time, goals are tied to relevant KPIs because KPIs are the most important metric for measuring success.
2. Improve direction
When goals are transparent and cohesive, team members are clear on the direction they need to go in. There become a strong rationale and purpose behind the work they are doing.
3. Focus one’s attention
In any organization, it’s likely that employees are juggling several important roles. Business goals pull attention back to where it belongs and remind us all of what is most important when things get a little chaotic.
Some reasons to avoid tying reviews to goals
If goals are meant to measure success and reviews are meant to evaluate an employee’s success, then where’s the disconnect?
Well, goal performance is not so black and white. It’s possible to reach a goal and still fall short in other areas of your job. Or, it’s possible to fail to reach a goal but still be a rockstar team member.
Goals are meant to set a high bar.
If we’re completing 100% of our goals, 100% of the time, is growth even happening?
Goals are supposed to be challenging. We’re supposed to always strive for more. But missing a goal doesn’t mean we’ve failed. Punishing someone for not achieving a lofty goal dismisses their productivity and diminishes their motivation to aim high with future goals.
If someone were to meet 80% of their goal, wouldn’t that provide more context than just knowing whether the goal had been “completed” or “missed”?
Goal difficulty is subjective.
You hired each person on your team for a different reason. Each brings something unique to the table. And each works in a completely different way.
Performance reviews should level the playing field between employees by evaluating the areas in which they excel and the areas in which they can improve. But this will carry a different meaning with each team member.
The person’s experience, role, background, effort, time with the company, working style, overall job responsibilities, and projects should be taken into account more than whether or not the goal was completed.
Goals may have group components.
A lot of companies set 3 types of goals: organizational, team, and individual. So, the ability to complete a goal almost always relies on other moving parts within the company.
An outbound sales rep may have a goal of closing 10 new sales in a given period, but their role may not require them to engage in lead generation. In this instance, that rep is relying on someone else to bring in a stream of new leads. Their ability to complete their goal doesn’t rest entirely in their own hands.
A performance review should carefully look at the role each team member plays instead of just focusing on the end result.
The role goals play in performance reviews
At the end of the day, there’s a reason why a goal was chosen, so there’s nothing wrong with discussing it during a review.
There can be constructive conversations around why a goal was or wasn’t reached and what can be changed in the future to improve upon goal-setting.
Ultimately, the result of the goal is not as important as the job performance towards reaching that goal.
Performance reviews should highlight improvement in goals.
Let’s talk about our outbound sales rep who had the goal of closing 10 new sales. Instead, she closed 8. In the previous period, she had only closed 5.
If goal success were the defining factor here, it would be considered a failure and result in a negative review. That’s an unfair assessment.
In reality, this rep met 80% of her goal versus just 50% in the previous period. That’s a significant improvement that should be addressed positively.
Of course, there’s room to discuss why 100% of the goal was not met and what can be done to improve even further in the next period.
Focus on the bigger picture and reward productivity that leads individuals and companies in the right direction. And remember, if goals were easy to achieve, they wouldn’t actually be goals.
Performance reviews should focus on positives and negatives.
Imagine being an employee who has spent a year busting it in every aspect of their job. They walk into their performance review feeling good, then hear, “You failed to meet your goals; you did this wrong, you fell short here…”
Totally demoralizing. What about that hard work that was put in day in and day out? That’s being completely overlooked based on whether or not a goal was completed?
Performance reviews should highlight areas where the team member improved, showed increased effort, or had positive results.
The missed goal should be addressed to understand contributing factors or see what can be done - as a team or an organization - to be more effective the next time around.
Team members should walk out of a review with clear expectations, areas for improvement, and ideas for growth.
Performance reviews should be a two-way conversation.
Let’s face it - reviews are scary. Even the most experienced professional will get nervous before a review because annual assessments play a huge role in their future with the company.
So, why not create a positive, encouraging atmosphere?
The reviewer should be constructive: provide praise, concerns, and specific examples of performance (metrics are key here).
On the flip side, employees should be given a safe space to provide their own insights. Did they run into obstacles because of organizational structure? Was there a shift in strategy that affected the ability to meet a goal? Did serious personal issues come into play? Was team support less available than it should have been?
When reviews focus on the positive, it can be quite empowering.
Goals should represent ideal outcomes, not expectations
What is the ideal situation you picture for your company one year from now? Goals should motivate teams to try really hard to reach that.
But by using that outcome as the defining factor in reviews, you misconstrue what makes goal-setting effective for all organizations. They cease to become goals and instead become expectations. As a result, your teams will set increasingly less aspirational goals to help ensure they get positive reviews.
Use goals as a way to highlight improvement and gain insight into strategy. Your teams should come out of their review with fresh ideas for exciting new goals, not with anxiety about previous goal performance.