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On Performance Reviews: The Urge to be Better-than-Worst Raises Productivity

Social comparison, one of the psychological factors that limit the effectiveness of compensation schemes as a performance reward,* apparently also has a salutary effect in improving employee productivity if it is revealed how individuals rank vis-à-vis their peers.

One of the professors we reviewed on the compensation topic, Prof. Francesca Gino, has taken an interesting tangent out of that research to explore how public delivery of performance feedback (as opposed to pay) can affect productivity. The conclusions are:

  • Frequent feedback raises productivity regardless of where an employee ranks relative to peers.
  • Fear of being the worst is a much stronger motivator to improve than a desire to be the best.

Let’s examine the second conclusion first, as that was more unpredictably interesting. The research measured productivity improvements among people who were given a clear understanding where their performance ranked compared to their fellow workers. This information generated a stronger response when the person found out he or she was near the bottom than if they ranked highly. Such people measurably improved their productivity. Clearly, a desire not to be the worst is a powerful motivator to improve performance! On the other hand, people who found they were not near the bottom did not change their behavior much or at all. This held whether they were middle of the pack or near the top rating. Apparently “being the best” is less motivation than “not being the worst” in a corporate setting!

Taking such a public approach (outside of sales) would have to be handled delicately, as you don’t want to have it drift into public humiliation, but some form of comparative ranking could prove useful.

Public or private, feedback is best when constant

Most critically for people managers, however, was the first conclusion: Frequency of feedback raised productivity across the board regardless of ranking. This is more support for throwing out the annual performance review as the BIG MOMENT when feedback is given. Make the annual review a short, sweet formality by giving feedback constantly, even every day if appropriate or possible. Indeed, one could argue giving steady constructive criticism should be the manager’s top responsibility, because increased employee productivity would naturally make it easier for the manager to hit his or her corporate goals.

For more detail, read the summary on HBS Working Knowledge.

*Our principal David Tighe reviewed that research on this topic a few months ago, describing why human frailties made it nearly impossible for corporations to reward effort using pay-for-performance schemes.

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