<Mount soapbox>
When I was at Bell Labs, I was a performance review hacker, spending years on the committee at our site. We actually measurably improved people’s feeling about being reviewed. Now, I spoke to a Harvard Business School prof about this, and he said, from years of experience, that no company is ever satisfied with their process.
There are lots of ways to do it badly, and we’ve seen some good examples in this thread.
We theoretically decoupled salary review from performance review, giving the rating and the raise at different times. But you can’t really decouple them, unless you want to give bad performers raises.
Here is what worked best for us, from a boss who was really good at this.
First, we did what we called a natural ranking. This meant an undefined number of buckets with an undefined number of people in each. My boss had a philosophy of if there was more than a few minutes of argument about who was better, they went in the same bucket. We also agreed on the distance between buckets. We used this to respond to the dumb forced distributions mentioned already, and to drive salary distribution (which had a lot of other constraints.)
In our surveys and focus groups, we found that the number one complaint was managers going into performance review not know what someone did, or with a mistaken impression. To resolve this, we had each employee fill out what we called a Form 1, in which they listed their accomplishments and performance to goal. Then we required that each manager either accept this or say where they disagreed, and required a meeting to discuss it, with the form signed by the manager and employee. They may not agree, but at least the areas of disagreements were clear. In our department all managers got a thick book of all form 1s, unedited, and a manager’s summary, listing what they manager thought was most significant, and any disagreements. We were expected to read this before the review - it got over 200 pages often.
Forcing the form 1 review really helped, measurably.
Some managers hate to give bad news, some love it. If everyone gave immediate feedback, reviews would not be necessary. Since this seldom happens, I think they are a very good idea - if done right.