Reviews are a time to reflect on individual performance and get formal feedback from managers and peers. When done right, effective formal reviews can help ensure that your employees feel valued and appreciated, while helping your business create a company culture that promotes ongoing employee feedback—and can even improve top talent retention. Not to mention, performance reviews can help make your business more productive and successful. But when reviews use outdated practices and inefficient processes, they can do more harm than good to your organization.
It’s challenging for HR professionals to know if your business’s review cycle is a smashing success or has room to grow but having data against which to benchmark the effectiveness of your performance management process can help. Based on internal research and insights from the Lattice Advisory Services team, we’ve pulled together the top performance management statistics you can use to understand how your performance reviews are faring and how to improve them. Read on for the information and tips you’ll need to ensure your performance review process is the best it can be, for both your employees and your organization.
9 Tips to Boost Your Performance Review Process
1. Complete the review cycle in under three weeks.
Data shows that the typical review cycle (or where the middle 50% of our customers land) lasts between one and three weeks. The median review cycle duration is just under two weeks, or 12 days. To break that down step-by-step, we found that collecting peer, self, and upward review feedback typically takes one to two weeks, followed by an average of four days from cycle-end to review release, and another five to six days to collect all necessary eSignatures. Of course, this timeline doesn’t account for the weeks of HR administration and training that go into preparing for reviews, but hopefully, this gives you a benchmark against which you can assess the efficiency of your own review process.
2. Have employees nominate their peer reviewers to shorten the review cycle.
If you’re looking to decrease the timeline of your company’s performance appraisal cycle, consider having your reviewees pick which peers they want to receive feedback from, rather than leaving it up to their manager. When the reviewee nominates their peers, this process only takes a median of three days, while managers take an average of four days to complete this part of the cycle. Saving that extra day can help move things along and streamline your processes.
3. Keep peer reviews short and focused on a given period of time.
Between April 2019 and April 2020, 41% of companies using Lattice’s review system included peer reviews in their employee appraisal process. This year (for the period April 2020 to April 2021), only one-third of all companies, or 32%, decided to use peer reviews. Why the sudden drop?
The recent drop in peer review requests may be the result of companies either not wanting to burden their employees during an already stressful time, or thinking that team members are less informed on their peers’ great work because of the pandemic. Another hypothesis is that more companies are relying on ongoing feedback for peer input, allowing them to skip the formal peer input cycle during the review. Even with this year’s dip, peer review completion rates remained unchanged, at 86%, year over year.
If you’re looking to introduce (or keep) peer reviews, we recommend keeping them short and focused on the impact the reviewee had on the reviewer in a given period. You might also want to train your employees on how to write a peer review or use Lattice’s peer review template to teach your reviewers how to give fair, honest, and helpful feedback.
4. Expand feedback beyond managers to include more voices.
While this shouldn’t come as a surprise, our research confirmed that managers are the most prevalent source of input on employee performance evaluations. Interestingly, according to a 2021 Lattice People Program Market Study, a third (34%) of employee feedback came from teammates or cross-functional colleagues, and a quarter from clients and customers.
Relying too heavily on one source of feedback, like a manager’s, can introduce bias into your performance review process. Instead, consider expanding your company’s feedback source list to include more voices and perspectives that can speak to an employee’s work. For example, if your employee is in a client-facing role, hearing feedback from their customers can help them be a better employee for your business and partner for your clients.
5. Push for a (near) perfect completion rate on reviews.
Wondering how your company’s performance review completion rate stacks up against that of other companies? By analyzing data from 2019 and 2020, we found that the median performance review completion rate was 89%—that is, half of Lattice’s customers had a completion rate at or above 89%. What’s more, the 75th percentile for performance review completion was 96%. These figures should be encouraging, as they suggest that it’s reasonable to push for a (near) perfect completion rate on reviews. If you’re looking for ways to increase employee participation rates at your company, read our guide on how to boost performance review participation.
6. Use a five-point rating scale.
We’ve found that more than 60% of performance review questions use a five-point rating scale, such as:
- Did not meet expectations
- Sometimes met expectations
- Consistently met expectations
- Consistently exceeded expectations
- Far exceeded expectations
This scale type—five items with no numerical equivalent—is by far the most popular, with a four-option scale ranking a distant second, accounting for just 21% of questions. No other rating scale reached the 10% mark.
That said, regardless of rating scale, low ratings are disproportionately rare. Averaged across all scales, only a tiny share of reviewers ever gives the lowest rating possible: just 1.3% do when ratings are numerical (e.g. “1”), and 10% when they’re descriptive (e.g. “needs improvement”). Knowing that people are generally less likely to give the lowest score, we recommend you give your reviewers one more option than you think you need. For example, opt for a five- or four-point scale instead of having three or fewer rating options to collect more nuanced and flexible employee feedback.
7. Apply a descriptive rating scale rather than a numerical rating scale to the review process.
Reviewers presented with numerical ratings are less likely to rate individuals with the lowest option. That said, regardless of rating scale, low ratings are disproportionately rare. Yet data shows that reviewers presented with numerical ratings are less likely to rate individuals with both the lowest option and the highest option. Averaged across numerical scales, only a tiny share of reviewers (1.3%) ever give the lowest rating possible. Across descriptive scales, however, this number jumps to 10%, suggesting that ratings are more evenly distributed across non-numerical options.
We’ve also seen evidence that people teams agree with that sentiment, noticing that non-numerical scales lead to more nuanced, wide-ranging responses. In the last 12 months, the share of review questions without numbers has increased by 40% among Lattice customers.
When you’re finalizing your review questions, keep in mind that numbers and words impact everyone differently. To get the most out of your scale—and encourage reviewers to use the full extent of the options you’ve provided—we recommend that companies opt for descriptive ratings, not numerical.
8. Hold performance reviews as frequently as your business dynamics allow.
A Lattice market study shows that employee engagement is strongly correlated to review cycle frequency. Companies that run performance reviews more frequently tend to have more engaged staff than those that stick with traditional annual performance reviews. But while quarterly reviews proved to be better than those conducted semi-annually, which outperformed annual reviews, it’s important to note that manager investment was adversely affected by more frequent reviews.
As such, run performance reviews as frequently as your business dynamics allow. If having quarterly reviews is plausible, that’s great; but if that review volume would be an administrative headache for your people leaders, consider opting for a semi-annual review cycle.
And if annual reviews are all you can muster, don’t worry. At Lattice, we encourage companies to think about performance management beyond the review cycle—something we call purposeful performance. When managers incorporate performance review elements like employee recognition, professional feedback, and career growth conversations into their ongoing one-on-one check-ins with employees, everyone wins.
Creating a culture that values continuous feedback allows your managers to stay more in touch with what their employees are working on, their wellbeing, and where they want to go in their careers. But feedback goes two ways. Your employees can also use these check-ins to share regular feedback with their boss, chat about work-life balance, review goals, and discuss their employee development and career aspirations.
9. Build a connection between performance and compensation to improve employee engagement.
A Lattice market study found that employees who know their compensation is reviewed at least once a year are more engaged (curiously, reviewing an employee’s compensation more frequently than annually doesn’t move the needle on engagement).
We also found that employees who have their compensation tied to performance are more likely to believe their compensation is fair than those whose compensation is not impacted by their performance. While not every employee can have a bonus or commission check tied to their work output and results, you can still build this connection between performance and compensation during your performance reviews. Being (frequently) transparent with employees about how their performance rating impacts their eligibility to receive an annual merit increase or promotion can help motivate employees to do their best and take reviews seriously.
However, it’s important to remember that discussing compensation during a performance review doesn’t cancel out the need for a separate, formal compensation review. Here’s why we recommend giving these two processes individualized time: If your employee is sitting through their annual review anxiously awaiting to hear if they’ll receive a raise, they may be less attentive and receptive to the constructive feedback their manager shares with them. To ensure the direct report is fully present during their review, it’s best to split these into two different milestones.
Improve your performance reviews with Lattice advisory services
Every business is different, so the performance review process that works for one company might not necessarily work for another. Luckily, armed with data, insights, and a little extra help, your human resources team can work toward building a process that works best for your employees—and your organization. Learn more about Lattice Advisory Services and see how they can help your business refine your performance management process, people strategy, and more.