It's worth hammering on this point as much as possible hoping a few people listen, but there is at least one other important point about employee performance. If you're allocating bonuses, a single year's performance is probably a good way to do that, assuming you can accurately measure it. When you're talking retention and promotion, though, you're making a prediction of future performance, possibly at a variety of different jobs. That is even harder to do and more poorly reflected in the last year's results. You have some analogies to sports performance in this article, and you see this kind of thing all the time there. Guy does great in a single year, gets a huge, possibly long-term contract, then tanks. On the other hand, one of the better dynasties of the past decade was accomplished by the Golden State Warriors in the US NBA thanks to underpaying one of the all-time great players in NBA history because he suffered a series of ankle injuries early in his career and scared off other suitors. Single-year performance isn't necessarily reflective of a person's true mean abilities, and their place in the Pareto distribution won't be the same at all levels of advancement and responsiblity, either.

The problem, from a company's perspective, is you probably need to retain everyone at least five years, and actually give them a wide variety of assignments in that time, to really get any usable data about their long-term prospects.

Literally this. I’ve been banging on about this my entire career, not that corporate leaders tend to listen to the riff-raff. Especially in tech companies, they tend to only evaluate promotions and raises based on the past half-year of work, rather than a repeated pattern of successes across a diverse array of tasks and backgrounds over a significant period of time (years); even then, you only get the promotion if you’re on the right team, doing the right work, at the right time, and for the right leader. This leads to otherwise stellar performers going elsewhere, because the janitors, maintainers, and firefighters in an organization never get properly rewarded, respected, or recognized by leaders. Said leaders pass this off as “bad performers”, failing to realize the importance of superb talent working on less-than-stellar projects that keep the company running efficiently.

The only people who benefit from performance reviews are shareholders whose price pops when layoffs happen, and those who game the system for their own political ends. Top talent never really thrives in these, because they’re too busy doing actually meaningful and important work.

> On the other hand, one of the better dynasties of the past decade was accomplished by the Golden State Warriors in the US NBA thanks to underpaying one of the all-time great players in NBA history because he suffered a series of ankle injuries early in his career and scared off other suitors.

In case people want to read more about this:

https://www.essentiallysports.com/nba-active-basketball-news...

Interestingly enough, sports salaries are Pareto-distributed, which says something about how valuable (as assessed by the marketplace) each player is

https://marginalrevolution.com/marginalrevolution/2024/08/go...