It’s that time of year.  Many organizations embark on official performance review, a process dreaded by employees and supervisors. This system, along with the general promotion policy, is seriously overdue for an upgrade.

Your Promotion Policy

It’s no secret that many younger employees are eager to move up in the organization. The basis for a promotion is often linked to the annual performance review. George Georgiadis, an associate professor of strategy at the Kellogg School, cautions employers about their performance review system.

He explains that organizations typically use one of two types of appraisal systems: relative or absolute. They each have strengths and weaknesses.

• Relative: This system, known as ranking, requires managers to assign ratings to each worker as they compare to others in the department. “Rank and Yank” was made famous by Jack Welch at General Electric. In some companies, employees who score the lowest ratings are immediately terminated.
• Absolute: In these independent evaluations, managers measure how well employees have met the agreed-​upon performance goals. These goals are set at the beginning of an evaluation period. They may be based on whether a sales quota was met or not.

Create a System that Motivates Employees

Managers like ranking systems because they believe this approach will motivate everyone to work harder. But in a very competitive business, where people fear they could be terminated with little justification, there is often a problem.

That's because the ranking system reduces the motivation to be a team player. This may be especially true if employees decide that a co-​worker was unjustly terminated. In protest, they may look for another place to work.

In an absolute performance policy system, employers sometimes use a scale to rank employees. Researchers have shown that some managers hesitate to accurately review employees when they need to give a low score. Also, some research has indicated that women are more severely graded than men in these systems.

In all cases, employees tend to stress out about being evaluated. They realize that their compensation is impacted by the score they receive. More importantly, they link future promotions and their career path to what managers say about their performance.

A Better Way to Promote

While employees stress about their reviews, managers can improve the process by considering purpose. Yes, it’s important to give employees feedback. But it would be better to provide feedback on an ongoing basis.

Throughout the year, employees deserve the chance to understand where they are falling short and to improve their work.

Pay increases go hand-​in-​hand with performance reviews. Employees who receive top scores expect to receive the highest pay increases. However, giving top achievers an increase at a separate time from the average cost-​of-​living increase announcements may be more meaningful.

In addition, managers should refrain from linking a high-​scoring individual to the company’s promotion policy. For far too long, organizations have promoted employees who do very well as individual contributors to a new managerial position. The top seller becomes the sales manager, for example.

“What happens, too often,” says C. Lee Smith, CEO of SalesFuel, “is the top seller may not have the necessary mindset to be a great sales manager.”

Using Psychometric Assessments

To find candidates with a managerial mindset, managers can turn to psychometric assessments. Every employee possesses unique strengths and attributes. These details are revealed in assessment results.

One of the most complicated tasks managers face is deciding who to promote. Leaders should reconsider any promotion policy that rests solely on length of employment.

Employees who have excelled in the current position may be deserving of a promotion. But the organization may experience a better outcome if they reward great service from a long-​tenured employee with a new title and a bonus.

Using Assessment Results as a Promotion Tool

Assessment results indicate which employees could be developed into managers. In addition, the TeamTrait platform allows organizations to measure fit between employees and a prospective manager. These data points give organizations a better idea of which employee will excel, with the right training, in a supervisory capacity.

The relationship between individual employees and their manager is crucial when it comes to job satisfaction. These days, employees want a manager who is empathetic. And they also hope to fulfill their potential as a top producter with the proper managerial support.

Looking Ahead

Before another round of performance evaluations begins in your organization, consider making some changes. Resolve to offer employees continuous feedback to strengthen their work quality and commitment. And be sure your promotion policy is based on factors that match organizational goals.

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