World Class Faculty & Research / March 17, 2017

Why Your Next Performance Review Might Never End

SMITH BRAIN TRUST — Those annual employee performance reviews can be pretty stressful. But what if instead of being a once-a-year thing with just your boss, they were every day, with everyone you work with? JPMorgan Chase & Co. is revamping the way it evaluates its 240,000 employees, deploying a mobile app that will let colleagues across the organization send and receive instant feedback about each other any time.

Executives say the application, Insight360, was inspired by the bank’s younger, millennial employees, many of whom say they prefer continuous feedback, rather than a once-a-year report card.

The move shows how companies are going out of their way to attract and retain millennial employees, who now comprise some 70 percent of the workforce for many organizations. Companies are seeking to create an environment where employees become so comfortable giving and receiving input that it becomes “entrenched in their routines,” says M. Susan Taylor, Smith chair of human resource management and organizational change at the University of Maryland’s Robert H. Smith School of Business.

Few details have been released about JP Morgan’s new app, which is expected to be fully implemented sometime next year. The company says its workers will be able to request written feedback or give unsolicited input about their colleagues. Or, a manager could invite feedback on a particular employee as soon as a project or a meeting has ended.

Experts say such tools could yield useful insights into employee performance, but they caution there might also be pitfalls in the way it’s crafted.

Debra L. Shapiro, the Clarice Smith Professor of management and organization at the Smith School, has studied how companies create and manage perceptions of fairness in the workplace. She says that, if conducted in a manner that is procedurally fair, a task-specific 360 approach to performance evaluations can be "very motivating, even inspiring."

"But the 'if' is a very big 'if' because creating procedural justice takes a lot of work on the part of many people, including the employee themselves. At a minimum, employees need to have: 1. input on what the criteria will be by which they will be evaluated, and 2. access to training and resources that will empower all employees to receive positive evaluations."

Furthermore, she and Taylor both say, peer reviews can devolve into popularity contests, if not properly managed. "JPMorgan will definitely need a strong framework to show how conversations between employees and their bosses should play out and the ways in which they interact with their peers once the review system is in place," Taylor says.

Shapiro suggests that the system incorporate “very specific behavioral indicators,” to prevent personal bias or friendships from leading to undeserved ratings. “Biases will creep in, but they can be minimized with the way the questions are phrased,” she says.

In other words, rather than asking for general feedback, the system should request objective input, such as, "Was this person on time to meetings? Was this person prepared for meetings with data needed to guide decisions? Did this person contribute in a timely manner to the final work product?" And so on.

Shapiro explains that performance reviewers tend to give higher ratings to people they see as more (rather than less) similar to themselves and with whom they feel more (rather than less) affinity. This is called “the in-group favoritism effect." Indeed, in her own research Shapiro has found that even poor performers tend to be evaluated more favorably when the reviewers perceive them to be in-group rather than out-group members.

"The way to weaken the in-group favoritism bias in performance evaluation,” Shapiro says, “is to have very specific behavioral indicators." Taylor notes that behaviorally specific indicators also weaken people's ability to use the system to malign unfairly a colleague who is unpopular.

Taylor, who is also the co-director of the Smith School’s Center for Leadership, Innovation & Change, cautions that any new employee-review system should be pilot-tested before full implementation and that it be coupled with a survey to gauge how employees feel about the new system.

JPMorgan, the largest U.S. bank by assets, is among a growing list of companies that are rethinking the annual performance review, supplementing them with more-frequent progress updates, or ditching them altogether. Goldman Sachs Group began experimenting with an online, constant feedback system last year, saying the move was also motivated by the millennial culture in the company.



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About the University of Maryland's Robert H. Smith School of Business

The Robert H. Smith School of Business is an internationally recognized leader in management education and research. One of 12 colleges and schools at the University of Maryland, College Park, the Smith School offers undergraduate, full-time and part-time MBA, executive MBA, online MBA, specialty master's, PhD and executive education programs, as well as outreach services to the corporate community. The school offers its degree, custom and certification programs in learning locations in North America and Asia.

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