Tom DiDonato — Stop Basing Pay on Performance Reviews

Performance reviews that are tied to compensation create a blame-oriented culture.

They reinforce hierarchy, undermine collegiality, work against cooperative problem solving, discourage straight talk, and too easily become politicized

Lear replaced performance reviews with quarterly sessions in which employees talk to their supervisors about their past and future work, with a focus on gaining new skills and mitigating weaknesses

The quarterly review sessions have no connection to decisions on pay.

We believe that traditional performance reviews do little to motivate people. The way to drive high performance is through honest feedback that employees and managers really hear.

Supervisors and employees say the sessions are less stressful and more productive than the old performance reviews. Managers are more comfortable giving feedback without fear of backbiting from employees, and discussions tend to focus less on specific accomplishments and more on people skills, which are so critical to overall company performance.

There has been a noticeable increase in collegiality.

They give special stock awards to a few people every year for extraordinary technical accomplishment.

A lot of articles that I have read say we should not link performance reviews and pay raises. But they don’t talk about the aspects to consider for pay raises. I’m still a lot confused what to consider for compensations.

What would be the weak spot for not linking performance and pay raises? Would it be different for each company?

I recognize the good points of not linking pay raises with performance review but am still not sure about what to do with compensation and evaluation.