HR 101: The history of performance reviews

Welcome to HR 101. Class is now in session. Today’s discussion will focus on the history of performance reviews.

The history. Performance reviews may have come about in WWI, when the US military established a merit rating system to help leaders identify the soldiers who should be transferred or discharged as a result of their performance, according to Harvard Business Review.

The idea of evaluating workers based on performance caught on in corporate America, and by the end of WWII, around 60% of US employers had adopted this practice.

In 1950, the Performance Rating Act was passed, requiring the federal government to create appraisal systems to evaluate its employees. It also established the now-familiar performance rating scale of “outstanding, satisfactory, and unsatisfactory.” Four years later, the Incentive Awards Act allowed federal employers to reward employees “for superior accomplishment, suggestions, inventions, special acts or services, or other personal efforts,” according to the US Office of Personnel Management.

By the 1960s, around 90% of US employers had a performance review system, Harvard Business Review noted.

In the 1980s, Jack Welch, GE’s CEO, set the standard for how performance reviews would be conducted for the next few decades. Welch created the “forced ranking” system, through which employees were judged against each other, rather than against a set of standards, the Society for Human Resource Management reported. Welch’s system was met with mixed reviews, with critics suggesting it could result in managers playing favorites.

Over time, some employers reconsidered the effectiveness of forced ranking, with Goodyear and Ford ditching the system in the early 2000s.

Fast-forward. Just 26% of global employers say their performance review strategy is effective, according to a 2022 survey by WTW.

In 2011, professional services firm Kelly Services became one of the first big companies to abandon performance reviews in favor of more frequent, informal feedback sessions due to questions about their effectiveness, according to Commonwealth Payroll and HR.

Adobe followed suit in 2012, the site noted, and by 2016, companies including Deloitte and PwC revamped their reviews to focus more on developmental feedback.

As the workplace continues to evolve, so might the way HR communicates with and delivers feedback to employees.

“​​Your talent wants fairness, equity, and transparency above all else,” Jason Medley, CPO for coding test and interview platform Codility, wrote in HR Daily Advisor. “There is simply no way to achieve this in a once-per-year meeting. Your talent wants more, and let’s be honest: So do you.”

HR pros, we want to hear from you! Tell us about your performance review strategies by emailing [email protected].