How data-driven performance reviews enable organizational transformation

Some people see performance reviews as a simple box-checking exercise that disrupts the day-to-day operations of a business. However, that couldn’t be further from the truth - especially when performance reviews are data-driven. 

While a subjective approach to performance reviews can lead to issues such as inconsistency and biases, using data ensures every member of your workforce receives an honest and fair review. It also allows your management team to use this data to make improvements that resonate across your organization.

So, we’ll analyze how you can use data-driven performance reviews to identify your employees’ strengths and weaknesses so you can make solid, data-led strategic decisions for the betterment of your business.

The issues with traditional performance reviews

The traditional approach to performance reviews has focused on how superiors perceive an employee's performance, attitude, and work ethic. While this method of assessing performance is standardized across multiple businesses and industries, it leaves vast room for improvement for several reasons.

Subjectivity and bias

By not using data, a traditional performance review is open to subjectivity. What might be perceived as a good performance by one manager may be perceived as poor by another. However, without data, there is no way to determine which review is more accurate. The relationship between employees and managers can also heavily influence a performance review, leading to biases and a lack of transparency.

Inconsistency

With subjectivity also comes inconsistency, which means any information collated in traditional performance reviews can be unreliable. There’s also the risk that different managers use different criteria to assess their teams, resulting in a lack of standardization.

A negative impact on engagement and workplace culture

Performance reviews relying so heavily on subjectivity and the biases that come with it can harm employee engagement, leading to a workplace culture built on resentment and anxiety.

Similarly, traditional performance reviews usually focus on the negative aspects of an employee's performance, which can cause reduced productivity.

Limited frequency

Many businesses limit traditional performance reviews to annually or twice annually. With such long stretches between performance reviews, issues can go unnoticed, achievements can be overlooked, and growth opportunities can be missed, which can all have negative impacts.

A lack of actionable insights

Traditional performance reviews often focus on the past rather than the future. Plus, when your performance reviews are subjective, you can’t implement accurate goals and development strategies. As a result, your employees’ effectiveness and efficiency will stagnate.  

What are data-driven performance reviews?

Data-driven performance reviews are a method of delivering employee performance reviews that forgoes the subjective approach of traditional reviews and instead relies heavily on data.

With data-driven performance reviews, employees get a fair evaluation that focuses on the positives and how they can improve. Accordingly, employees can grow and develop, allowing your organization to deliver ever-improving service to your clients.

How can your organization approach data-driven performance reviews?

Unlike a traditional performance review, a data-driven approach ensures that both your employees and your organization will see the benefits. That means it takes a strategic and thoughtful approach, not a one-size-fits-all.

To do this, consider the following steps:

1. Outline the KPIs - The first stage is outlining which employee KPIs align with your organizational goals. These KPIs will vary depending on an employee’s role, responsibilities, and seniority and should be measurable and objective.
2. Establish a way to gather data - Use reporting tools to gather qualitative and quantitative data related to your KPIs. Many tools let you automate this process so it doesn’t impact efficiency elsewhere. Data can include reports, project updates, evaluations, and feedback.
3. Analyze the data - Analyze the data with your KPIs in mind, evaluating how the two align. At this stage, you will be able to identify where employees are performing well and which areas need more attention. It will also enable you to spot skills gaps and opportunities to offer training to improve their performance.
4. Set employee goals - Based on the data you have gathered, you can collaborate with employees to establish clear objectives that align with your overall business goals. By following this step, you will also create data you can use in future performance reviews.
5. Offer continuous feedback - Infrequent performance reviews aren’t reliable, so switching to quarterly or monthly reviews will ensure continuous improvement.
6. Offer managers training - Switching to a data-driven approach may not come naturally to all your employees, so offering training will ensure managers use data effectively to drive performance reviews.

Using data to assess employee performance makes it easier to ensure employee growth contributes to the overall success of your business. Data-driven reviews also encourage transparency, celebrate the success of your employees, and establish a culture focused on development.

What data do you need to ensure performance reviews contribute to your business goals? 

To ensure your organization’s performance reviews align with your business goals, you need to understand what data is most valuable. The data examples below can provide key insights:

• Individual performance data - Data related to each employee offers the opportunity for a fair and objective review. For example, data could include timesheets, sales targets, error rates, task completion rates, conversion rates, customer feedback, or sales targets. This data offers a clear and transparent view of how employees are performing and the areas in which they could improve, leaving no room for subjectivity.
• Quantitative performance metrics - Objective and quantitative performance data are imperative to evaluate how an employee’s performance contributes to the success of your business. Examples include customer lifetime value, monthly revenue, response time, project completion times, and conversion rates. Using this data in performance reviews allows you to spot trends and ways employees can grow to improve these results.
• LMS data - Data from your learning management system (LMS) allows you to see how learners engage with your content and identify how you can offer employees additional support.
• Feedback - Feedback from across the organization, as well as from customers and clients, can provide a dataset that doesn’t risk the bias that can come from only using one source. Feedback can also include any data related to employee recognition and rewards.
• Employee satisfaction survey data - Using this data will allow you to determine how your employees perceive your organizational culture and correct any issues that could impact performance, efficiency, productivity, motivation, or engagement.

Best practices for managers running data-driven performance reviews

Adopting a data-driven approach to performance reviews can seem daunting at first, but the benefits to your employees and business mean it should be a priority. Managers will have to switch how they approach performance reviews to ensure a fair, consistent, and standardized approach across your organization.

Here are some tips for managers and business leaders who want to adopt this approach:

• Ensure your managers are familiar with your overall business goals so they can build an employee's performance review with these goals in mind. 
• Collate a comprehensive set of data that aligns with your KPIs, so managers can deliver a complete and objective review. This ensures employees receive goals and development opportunities that benefit themselves and the business.
• Remove biases and favoritism from the process, and don’t be afraid to be honest with constructive criticism just because you may be closer to some members of your team than others.
• Don’t compare the data of one employee with the data of another. The goal of data-based performance reviews isn’t to increase competition among employees, as this can lead to cultural issues. Data should remain confidential.
• Offer continuous feedback to ensure it’s timely, relevant, and open. It’s equally important to offer positive feedback as constructive feedback.
• Focus on employee growth while ensuring it aligns with their career goals and your overall organizational goals.
• Encourage personal development and self-awareness.
• Ensure your team members are accountable by keeping records and encouraging them to follow through on their development goals.
• Continually seek to improve your performance review process. This tip is vital if your organization is new to data-driven assessments.

For managers new to this approach, there are eLearning courses on managing performance that can develop and upskill managers so they’re confident using data in performance reviews.

Using data to follow post-review progression

Adopting a data-driven approach to performance reviews is just the first part of the process. Creating a culture centered on continuous improvement means using data to monitor employee progression.

Your HR department or learning and development specialist can grant managers admin access to monitor engagement with your LMS. They can then use this access to collate data, including training completion rate, time spent using the platform, and assessment scores. With this data, managers can further personalize employee training plans and offer additional support when needed.

You could also introduce a micro-credentialing system, which enables employees to learn in small chunks over time to master a new skill or topic. Using employee feedback is also crucial, as this feedback can help make improvements to employees’ learning and development strategies.

Transform your workforce with Go1

Now that you know how data-driven performance reviews benefit your employees and your ability to meet organizational goals, why not adopt this efficient and effective approach?

Download Go1’s Future Fits eBook to learn more about how to support your teams in building future skills. Or, you can speak to one of our experts to find out how Go1 can support your organization’s learning and development strategy.