Recency bias occurs when managers rate an employee based on their most recent performance, leaving out the whole picture. (Photo: Shutterstock)

Objectivity is the most important part of having an effective performance appraisal system. What you want is a system in which your top performers are recognized and then given opportunities to advance their skills. Meanwhile, rather than being discouraged, low performers should come out with the advice and motivation they need to improve. Unfortunately this isn't always the case.

A CEB survey found that 9 in 10 HR leaders don't believe annual performance reviews result in accurate information. Imagine you have a talented employee that gives 110 percent but finds their performance evaluation doesn't reflect all their hard work. Eventually, their disillusionment will turn into disengagement. Then they'll begin to look for another job where they feel their work will be appreciated. The US Department of Labor reported that the number one reason Americans leave their job is because they don't feel appreciated.

Recommended For You

Whether we realize it or not our brain has a natural tendency to sort information into groups in order to process it more easily. This can lead us to make snap judgments about a person without even realizing it. Some psychologists call this the Idiosyncratic Rater Effect. They found that on average 61 percent of a rating is based on the judgments of the rater rather than the ratee. When one person's unconscious bias is applied to performance appraisals, it can lead to inaccuracy, favoritism and even unfair treatment of employees based on their age, sex, race or sexual orientation.

However, there are ways to mitigate the effects of unconscious bias. Here are 5 common types of bias that affect performance appraisals and how to overcome them.

Central tendency bias

This is one of the most common forms of bias that can impact your performance reviews. Whenever you have a 5- or 3-point scale, raters have a tendency to lump the majority of their employees in the middle. This happens most often when managers have a low performer and just can't bring themselves to give them a low score, fearing they'll damage their employee's confidence. This is actually worse for low performers as it doesn't clue them in to the fact that they need to improve or give them any valuable information about what they need to focus on.

What you can do: In the past, to overcome this natural tendency, tactics such as forced rankings were used to push managers to rank each of their employees against each other. However, as we have seen, forced or stack ranking has a negative impact on performance. Instead, ranking employees against each other creates high competition and animosity within teams. Rather than working together, teams begin to work against each other to receive a higher score.

To overcome central tendency bias, instead base performance appraisals on specific competencies. Everyone has their strengths and weaknesses. Maybe one of your employees is not a strong public speaker, but they're a good writer. Rather than focusing on public speaking, push them to improve their writing skills and give them assignments where they can build this strength. The most valuable information an employee can get from the review process is an insight into their strengths and areas for improvement. Encourage managers to really highlight both in each employee's review so that afterwards they can create an effective development plan.

Recency and spillover bias

Our ability to recall an employee's performance can also have a major impact on their results. Remembering accurately how each employee did throughout the year is almost impossible. It can be especially difficult to recall projects that were completed during the first and second quarter. Recency bias occurs when managers rate an employee based on their most recent performance, leaving out the whole picture. Alternatively, spillover bias occurs when managers continue to rate an employee based on past performance, failing to take into account recent improvements.

Forgetfulness on the part of the rater can actually lead an employee to be over or under valued for their work. This is especially demotivating for employees who show improvement later in the year but continue to be rated based on their previous performance.

What you can do: Ditch the annual review. It's much easier for people to recall the performance of an employee over the course of 3 months than over the course of a year. Consider instead implementing quarterly or biannual reviews. This doesn't have to take up time. There are new tools that can help you set up reviews quickly and more frequently.

Negativity bias

With more frequent reviews, you also want to make sure that your employees are getting the most out of the information they receive. When employees are used to getting feedback they're more likely to know how to analyze and use it effectively, but some people have to learn this skill. People have a natural bias towards negative situations. This is a natural defence mechanism that helps us remember and avoid dangerous situations. However, negativity bias can also get in the way of our professional development. Instead of learning from constructive feedback, it can instead induce fear or anger.

What you can do: Help your employees develop an open mindset to feedback by giving it continuously throughout the year and coaching them on how they can analyze the information they receive, create a development plan and stay on top of goals. Read more about how to help your employees overcome their fear and open themselves up to feedback.

Halo effect, confirmatory and similarity bias

These types of bias are based on our perceptions of others. The halo effect occurs when managers have an overly positive view of a particular employee. This can impact the objectivity of reviews, with managers consistently giving them high ratings and failing to recognize areas for improvement.

Whether positive or negative, we also have a natural tendency to confirm our preconceived beliefs about people in the way we interpret or recall performance, known as confirmatory bias. For example, a manager may have a preconception that their male report is more assertive. This could cause them to more easily recall instances in which they asserted their position during a meeting. On the other hand, they may perceive their female report to be less assertive, predisposing them to forget when they suggested an effective strategy or were successful in a tough negotiation.

The halo effect is often a consequence of people having a similarity bias for certain types of people. We naturally tend to favor and trust people who are similar to us. Whether it's people who also have a penchant for golf, or people who remind us of a younger version of ourselves, favoritism that results from a similarity bias can give certain employees an unfair advantage over others. This can impact a team to the point that those employees may receive more coaching, better reviews and, as a result, more opportunities for advancement.

What you can do: Basing performance on one person's perception makes biased reviews much more likely. Instead, 360-degree reviews allow each employees' performance to be assessed from multiple sources including managers, colleagues and reports. Reviews based on multiple perspectives can help to factor bias out of the equation.

Read more:

Steffen Maier is the co-founder of Impraise, the People Enablement Platform. Impraise helps unleash people's potential, doing more than just performance reviews, which means accelerating performance, fostering career development, and seizing all the moments that happen in between.

NOT FOR REPRINT

© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more inforrmation visit Asset & Logo Licensing.