By Serena Loftus, assistant professor of accounting
Companies invest millions of dollars in developing performance management systems, yet managers and employees continue to be frustrated by performance evaluations they perceive to be ineffective. A 2005 survey by consulting firm People IQ reported that only 13 percent of employees and managers — and only 6 percent of CEOs — found their organizations’ performance appraisal processes useful. There are many factors that determine the effectiveness of a performance appraisal system, but one of the most basic requirements is that it helps employees learn how to improve their future performance. A few years ago, my colleague Lloyd Tanlu, assistant professor at Washington and Lee University, and I set out to better understand how employees learn from performance feedback.
Drawing on prior research in psychology and our own experience providing performance appraisals, we hypothesized that employees are more likely to learn from the process if they understand the underlying causes of their performance appraisal outcomes. In other words, if an employee receives a low rating for time management, that employee has a better chance at improving if he or she knows the specific actions that led to that rating.
In a previous research paper, I examined how the words that managers use in earnings calls influence investor reactions to the information presented. For this paper, we took a similar tack, exploring whether the words that managers use when evaluating their employees influence the employee’s understanding of the appraisal. Specifically, we hypothesized that if managers use causal language — that is, words that convey a cause-and-effect relationship between performance and appraisal outcome — they can potentially improve their employees’ learning from performance feedback.
To test our hypothesis, we conducted a laboratory experiment in which we asked 111 participants to complete a word unscrambling task. After having them complete several rounds of the task, we provided them with feedback. Some participants received feedback containing causal words like “because” and “as a result of ” while others received feedback containing the same information but without causal words. Then we asked the participants to complete several additional rounds of the task, enabling us to observe how they incorporated the feedback into their performance.
The experiment resulted in two important findings. First, we found that participants who initially performed poorly on the task improved their performance more when they received feedback containing causal language than participants who received feedback without causal language. Second, we found no evidence that causal language improved the performance of high performers. This evidence is consistent with the idea that individuals who are already good at a task have less ability to improve their performance regardless of the feedback they receive. Surprisingly, our results suggest that providing high-performing individuals with causal language feedback could actually decrease their future performance.
For managers, the key takeaway here is that the use of causal language in performance appraisal feedback — words like “because,” “since” and “resulting from” — can significantly impact employee learning from the feedback and potentially improve the effectiveness of the appraisal process. Causal language serves as a tool that helps low- and average-performance employees connect their appraisal outcomes to their job performance. That understanding in turn can lead to improved performance. With high-performance employees, however, managers have to be careful of unintended consequences. The same language that can help improve the performance of low-performance employees can derail high performers, causing them to refocus their actions in an attempt to incorporate the feedback.
The use of causal language alone can’t save a flawed performance management system and its benefits are dependent on the quality of the feedback provided, but given the enormous time and resources companies devote to performance appraisal, it’s reassuring to know that that a few simple words can make a real difference.
“Because of ‘Because’: Examining the Use of Causal Language in Relative Performance Feedback,” co-authored by Serena Loftus and Lloyd Tanlu, appeared in the March 2018 issue of The Accounting Review.
