10 disadvantages of poor performance management

You know about the advantages of having a strong continuous performance management system—it helps align and track measurable goals, creates an ongoing feedback loop for coaching, and boosts engagement through recognition—but are there any disadvantages to not having ongoing performance management?

The answer is yes. Poorly-implemented performance management will cost your company. Dr. Herman Aguinis, the author of Performance Management, identified some of these critical consequences. His complete guide is available here, but for a snapshot of the effects of poor performance management, take a look at the list below:

1. Employees could quit based on unfair results. 

If an employee performs well and then feels that they were assessed unfairly, there’s little motivation left for him/her to stay with the company. Even if an employee doesn’t leave the company, they may become withdrawn and disengaged.
 

2. Fabricated or misleading information can affect the review.

Without performance data to back up the appraisal, there’s no way to determine what’s true—a manager or peer could provide information about performance that’s either false or misleading, thereby skewing the assessment unfairly. 

3. Employee morale may drop.

Employees who feel that they were evaluated unfairly will likely lose self-esteem, which can create resentment towards management as the organization as a whole—ultimately damaging employee morale across the company.  

4. Resources—including time and money—are wasted.

Preparing for an annual review takes up a great deal of time—Deloitte found that the average manager spends 210 hours on performance review activities. Can you spare an extra month of time to prepare for an annual review? Ongoing performance management is much more time and cost-efficient, and it produces better results. 

5. Employees become demotivated. 

When employees feel unappreciated or unrecognized, their motivation drops, which ultimately leads to lower engagement and lower performance rates. 

6. Job satisfaction drops and employees become burnt out.

If the performance management system you’re using is unfair and invalid, employees are more likely to become dissatisfied and burnt out in their roles.  

7. Legal risks increase. 

Giving negative appraisals with no data or proof to back up claims of poor performance can be risky. Employees who feel like they haven’t been evaluated fairly could take legal action against your company. 

8. Managers are forced to give up resources. 

In addition to the time costs described above, managers may also have to allow their employees to work on peer reviews to prepare for annual appraisals. Basically, an entire department—or even the whole organization—is forced to go into shut-down mode and to put priority work on the backburner until yearly reviews are completed. 

9. Failure to set standards makes the process unfair. 

If there are no standards for performance in employees’ roles, they won’t know what’s expected of them, and may simply not understand what justifies poor vs excellent performance. 

10. Biases become more prevalent. 

Without data and metrics to rely on to gauge performance, managers are more likely to give biased reviews.