Are Performance Reviews a Waste of Time and Resources?

NEW YORK (TheStreet) -- It's that time of year: Depending on your company's cycle, June is the month that managers prepare annual or semiannual performance evaluations for their teams.

Theoretically, reviews are utilized to ensure that employees are treated fairly and consistently across the organization. Their progress is monitored -- presumably -- through a standardized protocol and a shared language. Reviews should facilitate unbiased decision-making with respect to compensation and promotions -- and promote equal treatment for employees at every level of the food chain. They should also provide employees with a benchmark to measure their success and enough clarity to minimize the disappointment that is inevitable when expectations are not aligned with reality. Translate: You didn't get the promotion and/or bonus you think you deserve -- here's why.

Is it actually possible to establish a reliable system so that salary increases and bonuses are awarded based on true merit? From my experience advising countless clients on preparing for their reviews: No. It seems like a great idea but, in practice, I have found that it is impossible to remove biases and establish consistency when it comes to measuring contributions and performance. There is absolutely no way to even out the differences in how managers interpret the review process and the various metrics and scales to rate performance. A boss may play favorites, be threatened by ambitious employees, or feel shortchanged. Fairness? When your boss has a chip on her shoulder, you get whacked.

Even with the introduction of 360-degree performance appraisals, it is still possible to game the process. These evaluations are intended to incorporate feedback from various stakeholders who have worked with you in some capacity so as to level the playing field. The theme being that fairness is achieved through a diverse and large enough pool of respondents. By surveying a number of folks in your "circle" -- including subordinates, peers, supervisors, and outside relationships like vendors and clients along with your own evaluation -- the goal is to produce a collective and more reliable picture of your performance versus the traditional evaluation where your boss is the sole rater. That's great: Those who choose their raters can potentially skew the results but for those who cannot, one angry anonymous reviewer may be weighted heavily.

Here are a few reasons why the current system is broken and some suggestions on what you need to do to get the best review possible.

The Forced Curve

Some companies apply a ranking system to place employees into buckets or quartiles. You may have performed above and beyond and by most standards exceeded your goals but if three quarters of your colleagues did even better, you will find yourself in the bottom quartile. No one wants to be assigned here -- companies use that population to determine whose neck is on the chopping block when cutbacks are announced.

You Say Tomato, I Say...

An organization may have a single system, but every manager has a different interpretation of "meets" vs "exceeds" vs "outstanding." What is acceptable or even above average to one manager may be viewed as marginal to another. So, this basically means that two employees with equivalent performance will receive two different ratings.

Personal Feelings Get in the Way

Feedback is never entirely objective and unbiased. It is flat out impossible to remove personal feelings from a system that assigns numbers to performance. That's why employees who have grown up in a company often feel the need to move on. Their managers are not able to see them as grownups and deserving of expanded roles and responsibilities.

That's Not Fair!

If performance reviews are used as a basis to determine salary increases, bonuses and promotions, then differences in interpretation will often lead to uneven treatment for equally qualified employees. This is the sort of action that undermines employee loyalty and erodes morale.

The Language of Appraisals

Review "speak" is a language that has been developed to build appraisal models. In day-to-day conversations, virtually no one talks like this. So why are these the words used in performance reviews? What do these words even mean? The concepts and the language are incomprehensible to most folks. Here are a few examples from an actual review for an attorney who is a client of mine:

-- Demonstrates understanding of client service metrics and their importance in achieving business goals.

-- Utilizes internal and external data sources to better understand industry trends, clients, competition, and the regulatory environment.

-- Leads by example in communicating constructively, honestly, and candidly; seeks input from others; provides timely feedback to celebrate success and foster improvement.

Imagine the time and man hours wasted by employees simply trying to figure out how to respond to these vague themes. In this particular case, much of this review jargon had virtually no connection to my client's real day-to-day responsibilities.

Grade Inflation and Deflation

It is unavoidable. Some managers freely and indiscriminately dispense great grades. Not so bad if you happen to be a beneficiary of grade inflation. But when you work for the same company and your manager takes a harder line, you get the short end of the stick with a mediocre review.

No Room for Modesty

Most performance reviews include a self evaluation. When it comes to deciding on a score to assign yourself, you have no choice but to rate yourself higher. Not too much beyond where you should be or you will demonstrate a lack of insight and good judgment -- just enough self promotion and chutzpah to ensure your survival. For those of you who aim to please and believe in "truth in advertising," it may end up working against you. Remember, managers may be forced to rate their employees against a curve. If you introduce any doubts about your performance, then you give your manager carte blanche to rate you lower.

Don't Wing It

Always prepare for your review in advance, both the written portion and your sit-down meeting with your manager. Be ready to discuss your accomplishments and to offer specific examples where you have made a difference. Even more critical, anticipate negative feedback so that you can respond non-defensively and thoughtfully.

More from How-to

Former General Electric CEO Jack Welch Has 4 Tips to Getting a Promotion

Former General Electric CEO Jack Welch Has 4 Tips to Getting a Promotion

How to Make a Fortune Like Microsoft Billionaire Founder Bill Gates

How to Make a Fortune Like Microsoft Billionaire Founder Bill Gates

How Much Money Has Bill Gates Made Over Time?

How Much Money Has Bill Gates Made Over Time?

Preferred Stock & Common Stock: What's the Difference?

Preferred Stock & Common Stock: What's the Difference?

How to Buy a Stock

How to Buy a Stock