The Problem with Performance Review Bias is Systemic—Here’s What You Can Do About It

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For many employees, the performance appraisal is the much-dreaded event of any performance review process. But it really shouldn’t be.

Many employees find the performance cycle unfair and biased when it comes to evaluating individual performance. But biases aren’t just a result of recency bias or managers giving a higher rating to their favourite employees—it’s a systemic issue that enables bias to exist.

So what can you do about it? Without further ado, let’s jump into what performance review bias is and how you can mitigate it in your performance review process.

What is performance review bias?

Performance review bias is the unfair or subjective judgment of an individual’s job performance. Bias in performance evaluations affects the accuracy of performance reviews, which leads to unfair outcomes for employees as well as irrelevant development opportunities. Bias can manifest in various forms during the performance management process, and be influenced by factors like time, personal preferences, stereotypes, and even the performance management strategy itself.

There are multiple types of bias that affect the accuracy of performance reviews.

• Recency bias is when managers only take recent events into account when conducting performance reviews, overlooking earlier achievements and downplaying development opportunities.
• “Similar to me” bias occurs when the rater favours employees they have a close relationship with, or employees they believe are “more like” them.
• Leniency bias happens when the rater is more likely to be “lenient” with their evaluations and give employees better scores on the rating scale to avoid hurting employees’ feelings.
• Severity bias is the opposite of leniency bias, where raters are more likely to evaluate employees lower than seems realistic—sometimes managers feel like this motivates employees to improve, but it can just as easily demotivate employees to try.
• The horn effect, or horns bias is a form of cognitive bias where employee performance is weak in one area, but managers allow that weakness to colour how they rate the employee’s performance in other areas.
• Halo bias is where managers rate an employee’s performance higher based on their positive overall perception of the employee, making the employee’s performance ratings higher than they should be.
• Contrast bias occurs when managers rate performance by comparing an individual’s performance to other employees’ performance, rather than appraising the individual in their own right.
• Gender bias occurs when the employee’s gender influences the rater’s performance evaluation. This could be due to gender stereotypes influencing how performance is perceived, or even how evaluations are delivered in annual reviews (e.g. men might receive specific technical feedback where women get vague statements about improving).

Why does bias persist in performance reviews?

Ask anyone: They hate the performance appraisal process, and for a multitude of reasons. Performance reviews feel impersonal, reduce them to a number, or focus on the past instead of future development. Even managers find them frustrating. Without an effective performance management system, they’re often recording and storing performance reviews manually—a time-consuming process that also prevents meaningful data insights.

And that’s not all. The subjective assessments that make up performance reviews open the performance review process to managers’ unconscious biases.

So why does bias in performance reviews continue? Look, we know it’s easy to blame human judgement, but truthfully, bias is a systemic issue brought about by the way traditional performance management is designed. Performance reviews are built to be “open-ended” so that managers have a generic performance review template to roll out organisation-wide—but that just paves the way for their own biases to creep in. And there are a lot of common biases that can affect performance reviews.

When it comes to performance appraisals, most of the time the bias is unconscious. But that doesn’t make the bias any less prevalent. This is why open-box questions are so bad for objectivity. It’s not that managers are actively deciding to include bias in their reviews—it’s that the open-ended question style of evaluation enables managers to draw answers from their perspectives (which are often biased) rather than objective truths that need to be backed up with data.

In other words, the real reason bias in performance reviews continues is that the performance review process is not built in a way that discourages bias from affecting ratings. If your performance management strategy doesn’t focus on setting clear measurable outcomes for employees from the outset, then performance management has already failed. Objective measures for raters to back up their evaluations with evidence, reducing the opportunity to inject their own implicit bias.

How to mitigate bias in performance reviews

Now that we’ve got the “open-ended = open to bias” bit out of the way, we can talk about how to actually stop that bias. We’ve found five strategies you can implement in your organisation to reduce bias:

1. Establish clear evaluation criteria
2. Provide continuous feedback
3. Utilise multiple perspectives
4. Provide unconscious bias training
5. Promote DE&I.

Using a performance learning management system (PLMS) supports your performance management strategy. PLMSs combine the functionality of learning management with performance to reduce and erase the systemic issues within performance management and ensure employee development has a meaningful impact on business performance.

Establish clear evaluation criteria

First things first: Set evaluation criteria for your performance goals. Use your job scorecards to help you here. They’re derived from your business capabilities—i.e. the skills, knowledge, behaviours, tools, and processes that combine to deliver desired organisational outcomes. Your evaluation criteria will be the actions and behaviours that enable employees to perform their required capabilities and drive business impact.

It’s important to remember that setting goals is just the first step. Imagine you give yourself a New Year’s resolution to “get fit”. Okay, but how? You need to lay out the steps to actually getting fit—do you need a gym membership? How often are you going to work out? What workouts will you actually need to do? Your workout plan will need to be tailored to your abilities and goals, as well.

When it comes to capabilities, the best way to establish evaluation criteria is with competence. It’s the levelled scale that you can use to measure capabilities, where:

• Low competence indicates that the capability needs further development,
• Intermediate competence indicates employees are meeting expectations, and
• High competence indicates that expectations are being exceeded.

These criteria are essentially closing the open box (or at least “restricting” it). They keep evaluations focused on measurable benchmarks and minimise subjective interpretations, especially if you have multiple perspectives rating performance. They’ll form the basis of your performance evaluation questions.

Provide ongoing feedback

Picture this: Once per year, an employee on the sale team sits down with their manager and receives their performance appraisal—only this time, their manager says they haven’t been closing enough deals and have been consistently behind on KPIs for some time. Now the employee has to go on a performance improvement plan (PIP) to increase their performance.

The PIP could certainly address the performance issue, but wouldn’t it have been better to be more proactive about performance development? Once-a-year performance feedback is like slapping a plaster on a gaping wound—ineffective and not actually helping to heal the wound. But if you regularly provide feedback throughout the year (such as through coaching or just regular check-ins) then you’re more likely to catch and correct performance issues before they become a bigger problem.

This means embedding learning within performance management, and gives employees the chance to develop their capabilities throughout the performance period rather than waiting until an annual review to receive training.

This is particularly effective in mitigating bias based on recent performance, as well as horns and halo bias, because managers have to answer the specific performance evaluation questions set by your evaluation criteria.

Utilise different perspectives

The best way to ensure objective performance reviews? Encourage multi-rater feedback. Incorporate feedback from multiple sources, including feedback from direct reports, peers, and clients in performance evaluations. When you have diverse perspectives providing input it reduces the impact of any individual bias that may creep in.

When you’re rating performance, you’re rating how well employees are performing their role-based capabilities. You can use a capability assessments for this; they measure capability in levels of competence, indicating if capabilities need development, meet expectations, or exceed expectations.

There are different types of capability assessments that you can utilise here. We recommend using at least two types of assessments to ensure you get the most objective overview of actual performance and utilise that multi-rater feedback.

1. Self-assessments. These are evaluations in which the employee reviews their own performance. Individuals have a fairly good grasp of what they can and can’t do, but at the same time, they can be biased about their own achievements—which introduces a whole other type of bias. It could be that they think they’re performing a task better than they actually are (this is especially prevalent if they don’t actually know what their performance expectations are), or that they’re not doing a good job when their performance is actually meeting expectations.
2. Manager assessments. Managers have a better grasp of what business and performance objectives are, so they can better evaluate performance based on how it aligns with business goals. The only problem is that 51% of managers aren’t effective at assessing the performance of their direct reports, and that means reviews can still be inaccurate.
3. Subject matter expert assessments are carried out by—you guessed it—subject matter experts. This is usually reserved for specialist capability sets like executive positions, to ensure that employees with those capabilities are meeting the higher standards demanded of them.

Provide unconscious bias training

Unconscious bias training raises awareness of the unconscious biases that can influence judgements made about other people’s talent or character, often based on race, gender, or sexual orientation. Its main purpose is to reduce bias in behaviours and attitudes in the workplace.

Unconscious bias training isn’t just about highlighting where the biases exist. That’s not enough. It also needs to teach participants how to manage their biases and change their behaviour. For bias training to be effective at this (because breaking down biases requires structural changes to operations and policies within the business) it can’t be a one-time activity. Organisations need to commit long-term to eliminate bias, otherwise training is just a means to ticking the box of compliance.

Promote diversity and inclusion

Diversity, equity and inclusion (DE&I) is crucial for strengthening organisations’ workforces and culture. At its core, it’s about creating an equal-opportunity workplace founded on meritocracy, so it benefits performance management in several ways. You need to build DE&I into your organisation’s culture—that starts with training, but training (especially one-off training) isn’t enough to make sure it sticks. You need to follow up regularly and consistently to ensure that DE&I learnings are implemented and actioned continuously throughout the workplace.

Diverse workforces bring together individuals with varied backgrounds, perspectives, and experiences, enriching the evaluation process. Using multiple viewpoints in performance reviews reduces the prevalence of bias and ensures more objective evaluations of employee contributions.

Plus, DE&I focuses on creating an inclusive culture, not just an inclusive workforce. This means gender bias, racial bias, and other biases against minority groups are reduced due to a culture built on inclusivity and diversity. It also means there will be more honest dialogue between employees and managers during performance evaluations, leading to more constructive feedback and meaningful discussions about strengths and opportunities for improvement. Targeted feedback gives employees the opportunity to work on improvement areas as well as makes them feel recognised and valued, which vague feedback does not inspire.

What happens if you don’t root out performance review bias?

Your need to have ongoing organisational transformation to drive sustainability and agility, otherwise your business will stumble behind its competitors. So if your performance management is riddled with performance review bias, you’re cutting your business off at the knees.

• Employees will be disengaged. They can see bias in performance reviews—they’ll feel it’s unfair and that their efforts are going unrecognised and undervalued. Employee turnover will increase as they move on to new opportunities that will value their contributions.
• Bias undermines employee development. Bias means inaccurate performance evaluations, and that means any training that comes off the back of them likely won’t address performance needs. Worth mentioning, given 94% of employees want their workplaces to invest in their development. If that investment isn’t there, they’ll leave your business (and that will cost you more in recruitment and onboarding).
• Decision-making and resource allocation can become inequitable. Done right, performance management informs where recognition should be laid in the form of promotions and raises, as well as where (and what) training and development should be provided. Done wrong, and you get disparities in pay, career progression, and access to resources—and  that just exacerbates inequalities that already exist within the organisation.
• There could be legal repercussions to ongoing bias. Biased performance appraisals that perpetuate stereotypes or limit the opportunities of underrepresented groups expose your business to legal risks like discrimination claims and lawsuits. It will damage your company’s reputation potentially drive customers and investors away, as well as make it harder to attract, retain, and promote diverse talent.
• Organisational effectiveness will be reduced. Without accurate performance data, your workforce can’t meet strategic goals. Individual goals will be misaligned with organisational objectives, which means training won’t be able to drive incremental changes in employee behaviour to improve performance (and by extension, your bottom line).

Key takeaways

Bias in performance reviews negatively impacts your business’s ability to gather accurate performance data which can help inform development opportunities and talent management decisions.

Just remember that biased performance appraisals aren’t a problem lying solely on the shoulders of managers. Rater bias is just a symptom of the real problem: Systemic bias in performance reviews. In other words, traditional performance management is set up in a way that invites bias, rather than reducing it.

But it’s not all doom and gloom. There are five strategies you can implement in your performance review process to mitigate the risk of bias creeping in:

1. Establish clear evaluation criteria
2. Provide continuous feedback
3. Utilise multiple perspectives
4. Provide unconscious bias training
5. Promote DE&I.

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