Performance reviews play a crucial role in promotions and pay raises, but research shows that 60% of manager’s ratings are based on their own idiosyncrasies. The study further notes that only 20% of the typical rating is based on the employee’s actual job performance. 

How can companies make performance reviews more fair and accurate so the best employees receive the recognition they deserve and don’t leave out of frustration? And how can leadership teams identify employees who need additional support to succeed?

In a From Day One webinar experts from Confirm, an all-in-one people platform that truly reflects each employee’s impact and influence, answered these questions and more. 

Organizational network analysis (ONA) is at the center of what Confirm does, CEO Josh Merrill told session moderator Anna Maltby Patil. 

“It’s a really effective tool for surfacing things like, who are the subject matter experts that are enabling the people around them to get their work done? Who are the people energizing the workforce? Who are the people making an outstanding impact? And in some cases, who are the people creating concern as well as causing problems?” Merrill said. 

ONA ensures that decision-makers at a company see this crucial information, according to Merrill. This is why the most innovative businesses are now using it, he said. 

Why Is the Current Performance Review System Broken?

The U.S. military created performance reviews after World War I, and companies began using them in the 1920s. Today’s performance reviews still use the traditional four-point or five-point scale, with managers determining if an employee meets, exceeds, or falls below expectations.

“It’s interesting that even today, modern companies, tech companies, and large organizations, are still using these methodologies that were invented 100 years ago to make crucial performance decisions,” said Confirm president and co-founder David Murray. “In many companies, 80% of their money is spent on payroll, maybe more. And yet, the set of tools that we have to identify top talent are very limited.”

The workplace has changed drastically over the past century, and the traditional performance review model no longer works, according to Merrill.

“In the 1920s, work was solitary, it was repetitive,” he said. “We didn't have computers, we didn’t have the internet, we didn’t even really have telephones. Today, we work in networks. If you weren’t using Slack, Teams, or Zoom before the pandemic, you’re probably using it now.”

Many interactions that once happened in the office where a manager could observe them, such as one employee constantly helping another get their work done, now take place through messages in Slack. This means supervisors may not be aware of the situation, “and that’s where performance reviews have really started to break down,” Merrill said. 

How ONA Fits the Modern Workplace 

The idea behind ONA is to make interactions between employees more visible so they can take that into account during performance reviews instead of relying solely on the opinion of a single manager, according to Murray. He said this is not a new idea but a twist on an older one. 

360 reviews introduced the concept of incorporating feedback from an employee’s peers. American companies began using these reviews in the 1980s, but Murray said they aren’t effective.

“People pick the people that are going to say good things about them,” he said. “And yet we expect that CEOs and executives are going to trust that data, that somehow these pre-selected folks are going to say the critical feedback that needs to be said.”

Companies that use the ONA method ask each employee within the organization four questions: 

• Who do you go to for help and advice, and why?
• Who energizes or motivates you at work, and why?
• Who do you see as an outstanding contributor?
• Who are you concerned about that needs additional support or attention?

Merrill used a real-life example, with the names of the employees changed, to illustrate how ONA is more fair and accurate than the traditional performance review model. In this case, Tracy and Michael have worked for a company for the same time, but have different supervisors.

Tracy is a source of help, advice, energy, and motivation to the people around her. She’s making an outstanding impact. On the other hand, Michael has very little influence. No one’s really going to him for help and advice or identifying him as a source of energy or motivation.

Tracy’s manager wants to give her an ‘exceeds expectations’ rating on her performance review. Still, company officials tell the manager too many employees are getting that rating, and not enough promotions are available. Therefore, Tracy’s supervisor downgrades her to ‘meets expectations.’ 

However, Michael’s manager ‘likes him just fine’ and gives him a ‘meets expectations’ rating, Merrill says. 

“If all you had were those manager ratings, you would treat Tracy and Michael exactly the same,” Merrill said. “But when you bring in the ONA data, that network data from the people around them, now you can go, ‘Oh, these are totally different contributors in this organization, they need to be on different paths.’”

Overcoming Performance Management Bias

Some companies use ONA to identify bias in performance reviews so they can take action to solve the problem.

“As HR professionals, I think we’re all aware of the biases that exist around our organizations and within our leadership teams,” Murray said. “But something we don’t always face is that if you want to address a bias problem, you need to measure it.”

When employees feel included, they are connected to those around them, according to Merrill. This means their colleagues are more likely to name them as sources of help or advice.

When company leaders take ONA data on who employees consider top contributors and layer it with demographic information, they can tell where inclusion is and is not happening.

Confirm did a study of multiple companies to see if the gender of an employee had an impact on performance reviews. ONA data found that gender was a non-factor in who colleagues identified as a source of help, motivation, and impact.

“But what we then found was, if you are male, you are about 20% more likely to be rated higher by your manager than what our network data would predict,” Merrill said. “That’s a really important bias to be able to call out.”

One concern some people have about the question “Who energizes or motivates you at work?” is the answers might skew toward a company’s more extroverted employees. However, Murray said ONA “actually surfaces quiet contributors, those introverts that don’t always get recognized by their manager.”

Editor’s note: From Day One thanks our partner, Confirm, who supported this webinar. 

Mary Pieper is a freelance reporter based in Mason City, Iowa.