Evaluating Employees
Industrial and organizational (I-O) psychologists often help organizations design performance appraisal systems—systems for evaluating whether employees are meeting job expectations. A good appraisal system aims to be as fair, accurate, and useful as possible. I-O psychologists study ways to:
- reduce unnecessary subjectivity in ratings
- increase consistency across supervisors and teams
- make feedback clearer and more actionable
- support both performance and professional growth
When evaluations are done well, they help employees improve, help organizations place people in roles that fit their strengths, and identify where training or additional support is needed.
Performance Appraisals in Practice
Performance appraisals are typically documented multiple times per year, often with at least one formal meeting between an employee and their supervisor. The most effective systems are grounded in:
- the original job analysis (what the job actually requires)
- clearly defined performance expectations
- specific goals set by the employee and/or supervisor
These meetings can serve several functions:
- reinforcing strong performance
- addressing performance gaps with specific examples
- identifying next-step development goals
- discussing outcomes tied to performance (raises, promotions, improvement plans)
Performance appraisals also play a documentation role. Organizations often use them to create records of performance concerns, especially when poor performance might lead to probation or termination.
Beyond “Rating”: Development and Growth
Many organizations now use performance management systems not only to evaluate performance, but also to support employee development. In that broader role, appraisals can help organizations:
- identify training needs
- track whether a training program improved performance
- support employee goal-setting and career development
- encourage ongoing feedback rather than one annual “judgment day” meeting
This shift reflects a key I-O principle: feedback tends to be more effective when it is timely, specific, and connected to behavior.
360-Degree Feedback
One approach to performance appraisal is 360-degree feedback. In this system, an employee’s appraisal derives from ratings by supervisors, peers, employees they supervise, and from the employee themselves. Outside observers such as customers may also contribute. The purpose is to give employees (who may be managers) multiple perspectives on their job performance, helping them make improvements through their own efforts or through training.
Research on 360-degree feedback has produced mixed findings. Atkins and Wood (2002) found that self and peer ratings were unreliable as performance assessments, and supervisors tended to underrate employees who gave themselves modest self-ratings. However, others see this variability as potentially valuable—the discrepancies can generate productive conversations between employees and supervisors about performance (Tornow, 1993).
Why Performance Appraisals Often Fall Short
In theory, performance appraisals should help organizations achieve their goals, and most employees will actively seek feedback about their jobs if it is not offered (DeNisi & Kluger, 2000). In practice, however, many performance evaluations are disliked by organizations, employees, or both (Fletcher, 2001), and few have been adequately tested to determine whether they actually improve performance.
One reason evaluations fail is that appraisal systems are often inappropriate for an organization’s particular culture—its norms, values, hierarchies, and ways of operating and making decisions (Schraeder, Becton, & Portis, 2007). Examining the effectiveness of performance appraisal systems and training for their implementation remains an active research area.
Survey data underscore widespread dissatisfaction: research indicates that 95% of managers express frustration with their company’s review system, and managers spend an average of 210 hours annually on appraisals (Harvard Business Review, 2016). Approximately 77% of HR leaders agree that traditional performance reviews do not accurately capture an employee’s day-to-day performance.
Current Trends: From Annual Reviews to Continuous Feedback
Traditional annual performance reviews are declining. Data shows that 82% of companies used annual reviews in 2016, but this dropped to 54% by 2019. Many organizations are shifting toward continuous performance management (CPM)—an approach emphasizing ongoing feedback, collaborative goal-setting, and real-time performance monitoring rather than once-a-year evaluations.
Research supports this shift: organizations using continuous feedback mechanisms report 40% higher employee engagement and 26% improvement in performance compared to those relying solely on annual reviews. Companies emphasizing continuous feedback and development also see 31% lower turnover rates. Weekly check-ins between managers and employees appear particularly valuable, with 85% of employees reporting higher engagement through regular interactions.
The theoretical foundation for these approaches draws on research showing that feedback is most effective when it is timely, specific, and actionable (DeNisi & Murphy, 2017; Budworth & Chummar, 2022). Delayed annual feedback often loses relevance and fails to guide immediate improvement.
Bias in Performance Evaluations
A growing body of research documents systematic bias in performance evaluations based on gender and race.
Gender Bias
Women face distinctive patterns in performance feedback. A Textio (2022, 2023) analysis of over 23,000 performance reviews found that women receive 22% more personality-based feedback than men—feedback describing them as “collaborative,” “nice,” or conversely as “abrasive” or “opinionated”—rather than substantive, actionable feedback about their work. Studies have found that 66% of women’s performance reviews in tech contained negative personality criticism compared to only 1% of men’s reviews.
Research published in 2022 (“Potential and the Gender Promotion Gap”) found that women receive higher performance ratings but lower potential ratings than men. Because talent reviews weigh both factors, women may be overlooked for advancement despite strong current performance. Women are also 12% more likely to receive the lowest rating and 28% less likely to receive the highest rating compared to men.[1]
A Harvard Kennedy School study (Bohnet, Hauser, & Kristal, 2025) found that women rate themselves lower than men in self-evaluations, and women of color give themselves the lowest self-ratings of all—patterns that then anchor managers’ final ratings.[2]
Racial Bias
Managers tend to rate employees of color lower than White employees, with particularly sharp penalties for Black employees in the United States (Bohnet et al., 2025). Black and Latino/a employees receive 2.4 times more non-actionable feedback than White and Asian colleagues. Studies show that what is optional for White men—such as demonstrating a “good attitude”—appears to be required for White women and people of color to receive positive evaluations.
These findings have practical implications: lack of actionable feedback limits opportunities to learn and improve, which over time reduces access to promotions and higher compensation.
Reducing Bias in Performance Evaluations
Research suggests several strategies for reducing bias:
- Use structured evaluation criteria. Clear, job-relevant criteria reduce room for subjective impressions.
- Train managers on unbiased feedback. Teaching managers to provide specific, behavior-focused feedback rather than personality descriptions improves feedback quality for all employees.
- Monitor demographic patterns. Organizations can audit their performance data to identify systematic differences in ratings across demographic groups.
- Consider rating scale design. Research by Rivera and Tilcsik found that switching from a 10-point to a 6-point rating scale eliminated gender gaps in evaluations in male-dominated fields—suggesting that scale design itself can activate or suppress stereotypes about “perfection.”
- Benson, Alan and Li, Danielle and Shue, Kelly, "Potential" and the Gender Promotions Gap (March 4, 2024). Available at SSRN: https://ssrn.com/abstract=4747175 or http://dx.doi.org/10.2139/ssrn.4747175 ↵
- Bohnet, Iris, Oliver P. Hauser, and Ariella S. Kristal. "Can gender and race dynamics in performance appraisals be disrupted? The case of social influence." Journal of Economic Behavior & Organization 235 (July 2025): 107032. ↵