A brief history of the performance review

A performance review, often called performance management or PM, is a periodic evaluation of an employee’s progress toward their goals. These goals are professional development–related, such as completing a level of certification in a transferrable skill, or job performance–related, measuring employee productivity and value to the organization.

How useful are performance reviews? That’s a hot-button topic. I’ve read some articles that advocate for the restructuring of performance reviews and others arguing that they should be entirely done away with. Critics on both sides say that the performance review focuses on rewarding or punishing past behavior instead of improving future performance.

In this article I will go over a brief history of the PM system and how many companies have already updated their practices, and I’ll give some real-world examples of biotechnology industry performance reviews.

Employee management in the 20th century

The concept of systematic measurements of employee performance is very modern. Evidence points to the founder of Australia’s first management consultancy firm, Walter D. Scott, as the first person to describe something like the PM systems in use today.

Scott, an industrial–organizational psychologist, published several articles between 1910 and 1911 describing the qualities needed in a successful employee. According to his research, businesses should employ people with characteristics such as a good appearance and demeanor, a personality that would mesh with other employees and management, and a personal need to perform meaningful work.

Management theorist Arch W. Shaw also contributed greatly to the concept of employee PM.  In 1921, his A. W. Shaw Company published “Executive Control,” a book in the Shaw Factory Management Series that analyzed successful manufacturing, retail and wholesale businesses.

The authors of “Executive Control” asserted that a manufacturing plant manager “must expect that his men will grow and develop, and that his plan must fit such development. While principles remain constant, he must expect that conditions vary and both men and methods change.”

By the 1950s and 60s, industries established formal employee reviews. Managers used records of individual service and traits such as loyalty and punctuality to determine employee fitness.

Employees were not involved in this process until the 1970s, when managers started to communicate negative points in the review to each employee so they could improve. Employees could not advocate for themselves and were judged solely on production numbers and perceived personality traits.

PMs evolved through the late 1990s and early 2000s, when they began to resemble modern PM systems, allowing employees to participate in their evaluation. A performance improvement plan, or PIP, created a way for an employee to improve their unsatisfactory performance with clear goals and expectations.

What does a biotech or pharma PM look like?

In 2018, PerformYard, a performance management software company, spoke to Michelle Weitzman-Garcia, then head of workforce development at the pharmaceutical company, Regeneron, in the article, “How Regeneron built their performance management system.”

Weitzman-Garcia said she changed Regeneron’s individual goals and numbered-rating PM system to focus on conversations about employee accomplishments and competencies. She supplemented annual PMs with voluntary mid-year discussions and individualized review forms for departments such as research and development or product supply.

The research company Thermo Fisher Scientific employs a PM system combining a year-end comprehensive performance review with what the company refers to as “checkpoints throughout the year.” They also encourage ongoing performance discussions between employees and managers. Team leaders provide individualized feedback on employee performance. This gives the employee a chance to improve if they are judged to have low performance or rewards them with raises and bonuses for high performance.

Thermo Fisher Scientific also states the importance of employee development. They offer career and leadership development tools and programs for employees. Accomplishments in these areas contribute to the overall PM evaluation.

Established companies versus start-ups

Large biotechnology and pharmaceutical companies have the budget and structure to support robust PM systems. However, biotech start-ups often have just a few research and development employees and must institute their own version of PM.

Between 2007 and 2012, researchers at the University of Santiago de Compostela in Galicia, Spain developed PMs for a group of technology start-up companies over five years. They analyzed how to maximize both company-enriching objectives and employee professional development.

The researchers found that, in the first year, start-ups share many traits. New start-ups within the same industries are continually being established. Start-ups often have high debt from primary investments by other companies or individuals. And start-up employees tend to be highly qualified but have little previous work experience and a strong desire for professional development.

Overall, the research team found that these needs and expectations often result in high workloads for employees that may lead to demotivation and stress.

The team concluded that implementing a PM system requires a lot of time and energy from everyone in the company but is necessary for employee retention and morale. They recommended that start-ups create systems that include clearly defined goals, a budget for increased wages for high performing employees and a policy for training and professional development.

The future of PM systems

Despite their pervasiveness in all industries including biotechnology, no business is legally mandated to maintain a PM system. According to the U.S. Department of Labor, the Fair Labor Standards Act does not require performance evaluations. Instead, employers can freely decide if employees are obligated to participate.

However, if a PM is used to discriminate against an employee, the discriminatory review can be referenced in a court case. The Civil Rights Acts of 1964 and 1991 as well as the Americans with Disabilities Act are two federal laws that prohibit discrimination based on race, gender and disability status.

According to legal experts, employers can reduce the risk of their PM systems being used to discriminate against employees by keeping reviews objective and related to specific goals. Companies should also involve the employee in the review process and clearly state areas that need improvement, as well as helping them improve using specific goal markers.