The goal of performance reviews is supposed to be improved performance, right? Here’s how one company made that goal a reality — at no cost to the employer.
As shown in a study — “Tournaments Without Prizes: Evidence from Personnel Records” — detailed in the journal Management Science, the firm in question changed just one aspect of its performance-review approach, and immediately saw productivity gains of almost 7%.
The change? On top of the usual pats on the back and kicks in the rear, managers at the company revealed to each employee that person’s ranking in the performance-review ratings vs. other employees doing about the same job and also revealed the person’s ranking when it came to salaries.
Supervisors didn’t name names or cite specific salary figures. All it took to motivate workers was to tell them where they ranked on salary and performance, relative to co-workers. Once that aspect was added to the performance reviews, productivity zoomed.
The best thing about the approach: It cost the firm absolutely nothing to implement.
A copy of the full study is available here for $30 or by paying a subscription fee for the journal.