Leading vs. Judging - Part 3 by Mark Stone

March 2024. The most judgmental activity in which we engage is the annual performance review. What if we didn't?

Whether we should do performance reviews depends on the goal. Here are three potential goals: productivity, opportunity, and accountability.

Productivity: If we hold out a reward, and specify a set of objectives in order to earn the reward, do we incentivize greater productivity? Not necessarily.

First, as discussed in Part 1, setting out specific, measurable KPIs isn't necessarily the best way to maximize productivity, and may even be counterproductive. People are better motivated by goals that are aspirational and open-ended. So a rigorous set of measurable objectives, and a regular judgment about progress towards those objectives, isn't a good approach if our goal is to maximize productivity.

Second, we aren't very good at picking KPIs. The tech sector is a dynamic, ever-changing business, and a year is a long cycle. Few organizations are on the same trajectory at year's end. Many organizations reorg on a near annual basis.

Finally, we aren't flexible about adapting to externalities. The typical annual bonus is tied to a mix of individual performance, organizational performance, and company performance. Too many of the elements that influence these are out of an individual's control. So why are we judging people based on outcomes they can't control?

Opportunity: The annual performance review is supposed to offer opportunity in the form of professional advancement, either through promotion or through merit increase in one's current band.

Yet performance reviews do the opposite. They are demotivating. We are, by and large, committed professionals who do our best in the moment no matter what. Thinking about our performance review doesn't really enter into day to day decision-making. And that annual bonus? We bake that into our assumptions about base compensation. Raises seldom keep pace with inflation. Promotion is mostly achieved by switching companies. When a bonus isn't paid out attrition goes up.

So the current performance review process isn't maximizing performance and is hurting retention.

Accountability: Having a framework for accountability is vital. This might be a team charter, an organizational mission, or a company-wide set of guiding principles. Accountability, however, should be based on conduct, not on outcomes. We can influence outcomes, but we can't control them. We can control the values we manifest in our conduct, and those values should align with team, organization, and company.

Is an annual performance review necessary or sufficient to establish and maintain accountability? Probably not. As discussed in Part 2, servant leaders can establish accountability without judgement. Maybe it's better to simply lead, rather than judge.

Add / view comments.