Performance reviews are terrible, because there will always be error, and people who are overrated get complacent and those who are underrated get pissed. If t

Performance reviews are terrible, because there will always be error, and people who are overrated get complacent and those who are underrated get pissed. If the manager's any good, people know how they're doing. Okay, so what if the manager's not good? Then the employee's performance, if low, isn't really his fault. There's not much upside to reviews, because companies will either (a) find ways to give bonuses and advancement to top performers regardless of what they formally score, or (b) won't, but reviews won't help them. They exist for two reasons. One is to intimidate people. But that just doesn't work. Intimidating people into working hard leads to a useless product. The second is to generate a paper trail before firing people. But I think PIPs and performance reviews are a really bad solution. Better is to fire as soon as the problem is evident and irremediable, but to give severance instead of the 2-month "walking dead" phase in which he shits all over morale. The worst thing about formalized reviews is that they inhibit internal mobility. Top performers don't want to leave, for fear of risking a bad review. But in most companies, no one wants to take on the 80% of people who are "just average", even if they might become A players on a better-fit project. That makes departmental residency permanent and causes the "warring departments" phenomenon for which Microsoft is known.