Why Quarterly Performance Reviews Have Become Irrelevant

June 17, 2024

Should you put any stock in performance reviews in the future of work?

Quarterly performance reviews have long been standard practice in many companies, but as organizations become increasingly distributed and data-driven, the value of qualitative ratings will drop significantly. Talent Trends 2024 research shows 78% of organizations’ talent strategy decisions are already fully supported by analytics and companies are increasing investment in talent intelligence platforms. 

While quarterly performance reviews may have worked in the past, the future of work demands a shift to more quantifiable performance metrics. Entrepreneurs and new business leaders have the opportunity to change how we measure and manage performance.

Rethinking Performance Reviews  

Performance management has been the strategic approach many organizations use to sustain improved performance, keep staff engaged, and retain talent. Managers relied on quarterly performance reviews to align company goals with individual and team goals and create a work environment that enabled both the employer and employee to thrive. However, if you’ve embraced the future of work and still rely on this old-school performance appraisal system, we have bad news for you.

Besides inventing new jobs, adopting new technologies has also changed how, where, when, and with whom people work, making office space more fluid and flexible. Remote and distributed workforce models are the new normal.

How performance is measured is also drastically changing on a company-wide level... Before, companies could explain poor performance in anecdotal evidence to shareholders or investors. Today, however, with how ubiquitous data-driven company-level performance has become, it only makes sense that it will trickle down to the individual employee.

The Limitations of Qualitative Performance Reviews

The fact is, qualitative performance review models rely on managers having deep insights into their employees. In the future of work, managers have much less face time (sometimes zero) with employees. This problem can become especially evident in hybrid work models, where the employees who are more visible often receive better reviews than remote employees, regardless of performance.

Where managers aren’t able to interact closely with employees, attempting to implement qualitative reviews can become ambiguous and leave a bad taste in workers’ mouths.

Even for a fully in-office workforce, basing reviews on a manager’s personal opinion on subjective factors like teamwork, communication, professional growth, initiative, leadership ability, and culture fit can cause workers to feel like the feedback they receive is biased and unfair. Such reviews are prone to biases, lack actionable insights, and are ineffective at motivating performance. This is why 66% of employees are strongly dissatisfied with the performance evaluations they received. More alarming, 85% of employees quit after an unfair performance review.

The pace of technology and change also make quarterly reviews less valuable. Performance should be measured daily or weekly, not at the end of a quarter. The manual process of written, anecdotal performance reviews doesn’t support this frequency.

The Growing Value of Quantitative Performance Metrics

Performance can and should be measured in real time. This gives companies the ability to make micro-adjustments in habits to keep people on the right track for growth. The idea that you would have to wait 3 months to get feedback on how you’ve been doing is ridiculous. What if over those past 3 months, you were going in the wrong direction? Wouldn’t you want to know the directions are bad early in the road trip?

Conducting a data-driven analysis of engineering outputs and development efforts helps inform intelligent decisions and enhance business performance. By leveraging data, managers can make more objective and strategic decisions when solving talent management challenges. 

Get Objective Measures of Your Development Team

Get instant insights into your software developer team performance. A free assessment is available to teams of 40 developers or less. 

Gigster’s data-driven engineering dashboard, METRX, collects valuable, hard data through code contributions, including code volume, frequency, technology, rank, consistency, and more. These analytics enable you to locate areas of improvement, increase productivity, prevent bottlenecks, and implement intelligent hiring decisions. 

The quantitative data in METRX can be combined with talent intelligence platforms and  AI-powered team management software to assist in talent acquisition and management. These systems aid with recruiting, skill management, reskilling, and upskilling. Since every filled position doesn’t necessarily guarantee success, talent intelligence platforms use a scientific approach that ensures you hit the mark every time by generating personalized hiring criteria, improving person-fit tracing, enabling early success, and optimizing placement.

The most important part? AI powered by quantitative metrics performs consistently better than human experts making similar decisions.

Researchers at MIT built a model for predicting which professors would gain tenure and which would produce the most impactful and cited research. Most of the time (70%) the model agreed with the tenure committee - a group of people tasked with identifying talent and awarding tenure based on past and future performance. When the model and the humans disagreed, the young scholars identified by the model went on to significantly outperform the scholars chosen by the committee.

Finding the Right Balance

Understanding how your teams and workers are performing is important. But relying on outdated and biased methods for determining that performance is a sure way to lose your best talent. Instead, using data-driven talent management and AI can provide quantitative, reliable insights into overall performance.

We’re not saying that management should lose all human touch and be purely data-driven. The goal is to complement the human factor of leadership with technologies that allow for more immediate feedback loops. This tighter coupling of activity with response will help companies become more efficient and also enable employees to be more productive. 

There is still even a place for qualitative reviews as long as you set strong, measurable, and easily quantifiable goals for your employees. This isn’t always easy and takes time. With METRX, Gigster is able to get better insights into the overall software development lifecycle to set more accurate and tangible benchmarks for our teams.

If you’re ready to get more data-driven insights into your engineering teams, activate your free METRX assessment now. You’ll get instant visibility into your development project productivity and outcomes, identify bottlenecks, and better understand the needs of your team.

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