Now that your company has started giving more frequent feedback, you may be wondering how this new system will impact compensation and promotion decisions. You may be inclined to directly use the information collected, as you did with your annual performance reviews.
However, this could have consequences on your new feedback culture. We recommend that you try and separate feedback as much as possible from compensation and promotions. Here are two reasons why:
Stress inducing
One of the biggest problems with traditional performance reviews is that, rather than encouraging development, they often cause stress. With the potential to have a major impact on your employee's job security and financial situation, rather than looking at the information as an opportunity for advancement, employees often look on it with dread.
In fact, one report showed the stress it can cause led 22 percent of employees to call in sick rather than face their performance review. Receiving mostly positive feedback is a relief, while constructive feedback merely induces fear. This completely undermines the objective of feedback: to provide insights for professional growth.
Breakthrough innovation
Instead, the feedback process should be linked more to learning and development. The more learning based the performance management process is, the more likely employees are to take risks that could lead to breakthrough innovation. What HR has to do is eliminate fear of failure from the equation. Linking pay and advancement to performance can stifle innovation.
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