Big companies are starting to rethink how they do performance reviews. And that might do a lot to help their employees’ mental health.

In recent years, giants like Microsoft Corp. and Eli Lilly & Co. have dropped the standard model of performance reviews where an employee meets with a manager once a year and gets a grade. They’re moving toward setups where bosses and workers have frequent, low-pressure conversations about performance and expectations, and they’re ditching grades in favor of more nuanced ways to judge performance.

A deep effect
Companies have been debating and tinkering with performance reviews for a long time. Now, though, there’s science to back up the changes they’re making. In a 2014 paper in the journal Strategy + Business, David Rock, Josh Davis and Beth Jones, all researchers at the Neuroleadership Institute, concluded that the very act of giving employees a rating jolts them into a “fight or flight” scenario—“the same type of ‘brain hijack’ that occurs when there is an imminent physical threat like a confrontation with a wild animal.”

“The employee may not say anything overtly,” the researchers wrote, “but he or she feels disregarded and undermined—and thus intensely inclined to ignore feedback, push back against stretch goals and reject the example of positive role models.”

Finally, the study shows ratings can blindside employees and affect performance. Of the half of all workers who are surprised at the rating they receive, 90 percent are unhappy, because they expected a higher rating. Those displeased workers have a 23 percent drop in engagement, curtailing “collaboration, innovation and agility,” says Mr. Rock, the head of the Neuroleadership Institute.

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