More companies are abandoning annual performance reviews that have long been embedded in our workplace culture. They believe better ways beckon and annual reviews too often have fueled litigation.
Annual reviews don’t accurately capture the entirety of an employee’s contributions, some believe. Unpopular with management and employees alike, they are focused on grading instead of developing employees. How effective a management tool are they when they raise ongoing issues for the first time in an annual exercise? Studies show Millennials in particular prefer more frequent feedback.
They also create legal pitfalls, notes Susan Bassford Wilson, an attorney with the law firm of Constangy Brooks Smith & Prophete. “If you terminate an employee for performance reasons who has 10 years of positive reviews, then those reviews may undermine your termination decision.”
Stray bits of commentary that creep into the evaluation report may bolster discrimination claims. Wilson cites the example of saying, “You can’t teach an old dog new tricks,” to a 55-year-old employee which can bolster a claim of age discrimination. “Supervisor bias or favoritism can also create inconsistency, which can give rise to discrimination claims,” Wilson says.
She stresses that using the same performance system for all employees can promote consistency and objective evaluation, and support performance-based discipline or termination. Wilson stresses that when done right, they also can support employer wage decisions that are increasingly scrutinized as part of a reinvigorated campaign for equal pay for women and minorities.
Several states now ban wage discrimination for work performed in “comparable” but different positions that require equal skill, effort and responsibility. Wage differences are deemed defensible only when they can be traced to factors other than sex—including a consistently-applied merit system.
Zoe J. Bekas, an attorney with the law firm of Akerman LLP, also warns that terminated employees often claim their performance reviews were actually pretexts for the “real” reasons they were fired. “Performance evaluations are particularly effective in legitimatizing the employer’s stated reason for termination if the evaluations showed a decline in performance over time,” she says. But the opposite is true if the ex-employee enjoyed a string of positive reviews over the years, only to be fired after a single bad one.
Pretext also can be assumed if the employee engaged in protected activity like union organizing, participating in an investigation, or filing a charge against the employer. Pretext also can be found if different disciplinary measures were taken against other employees for the same conduct, especially if employees in a protected class consistently receive negative evaluations but their non-minority peers do not although their performance is similar.
For this reason, make sure to deploy detailed, objective criteria for measuring performance. The more subjective or ambiguous criticism is, the more it can be viewed as mere pretext for discrimination. Use examples and objective criteria, and focus on behavior, not attitude, Bekas says.
She cites one case where the court found suspect that the worker’s lowest scores in her performance evaluation were in soft skills it noted “cannot be taught,” such as “being upbeat.” The court stated: “Where termination decisions rely on subjective evaluations, careful analysis of possible impermissible motivations is warranted because such evaluations are particularly ‘susceptible of abuse and more likely to mask pretext.’”
Also give the employee an opportunity to comment. Allowing the employee to respond during the evaluation process can reduce miscommunication and frustration, Bekas points out. “Provide achievable goals—impossible goals set up the employee for failure and create distrust. And make sure to conduct performance reviews on a specific schedule and in a consistent manner.”
However, if you are interested in following other companies’ lead and abandon annual performance reviews, we will explore alternatives in a future column.