New research from Columbia Business School finds that if performance reviews are conducted in an individualized manner—based on comparisons to employees’ past performance rather than to their peers' performance—the reviews are far more likely to be seen as fair, which has been shown to improve employees' productivity and morale.
"Our findings show that, simply put, the process matters," says Joel Brockner, a professor of business at Columbia Business School.
"Oftentimes, the performance review process can be viewed as uncomfortable, unfair, and uninspiring. In order to improve upon the fairness factor and thereby better ensure employees accept the feedback, managers must acknowledge the individual identities of their workers and their specific contributions to the organization over time."
In their paper, How Temporal and Social Comparisons in Performance Evaluation Affect Fairness Perceptions, Brockner and his co-authors, Jinseok Chun, Ph.D. student at Columbia Business School, and David De Cremer, professor of management studies at Cambridge University's Judge Business School, compared two common approaches to evaluating employees.
Temporal comparisons are modeled on a "me now, versus me in the past" approach, while social comparisons measure performance relative to peers—for example, "you are currently doing better/worse than your colleagues."
The researchers found that temporal comparisons yield better results because they are perceived by employees to adhere to principles of interpersonal fairness, including respect and dignity, and to be more individualized.
This individualized approach, in turn, signals to employees that they are important and of value to the evaluator and makes them more open to positive and negative feedback.
Social comparisons, on the other hand, often lack specific details about individual performance and, as a result, can give the impression that an employee is being treated like "one of the masses" and lead them to be less receptive to feedback, positive or negative.
Takeaways for Managers
The results suggest that one way managers can enhance employees' perceptions of fairness in performance evaluations is to ensure that at least some aspects of the evaluations consist of temporal comparisons.
Furthermore, when organizations treat their employees as individuals in contexts other than performance reviews, it may help employees develop more positive attitudes towards their jobs, which, in turn, could result in higher productivity, increased morale, and bottom-line growth.
While the research shows temporal comparisons can make employees more receptive to feedback, managers still may prefer to use social comparisons in some situations.
For example, managers may rely on social comparisons to structure an equitable rewards system—salary increases, bonuses, promotions, etc.
Social comparisons can also be used to increase individual effort through competition.
Ultimately, however, managers need to assess the trade-off between the costs and benefits associated with social comparisons.