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Banking on the wrong option: Why Goldman Sachs should drop its plan for online appraisals.

Goldman Sachs has recently announced that it will start carrying out staff appraisals online instead of face-to-face. It might sound innovative but the bank could be making a big mistake.

First here’s the good news. Goldman Sachs has just announced that it will no longer carry out annual face-to-face performance reviews. The bank has realised, like many other organisations, that these meetings are at best pointless and, at worst, embarrassing charades that simply cause irritation and disillusionment among the people they’re supposed to benefit.

And here’s the bad news. Instead, Goldman has created a web based tool that it describes as a “safe digital space,” in which its 36,500 staff can exchange views on their performance. So, the bank, which typically culls around five per cent of its staff every year, has removed one stressful and de-humanising process with something even worse.

Continuing the traditional 360 degree assessment with input from up to six colleagues, staff will receive written feedback and be graded as outstanding, good or (the euphemistic) ‘needs improving.’

Providing feedback online allows people to upload and access it wherever and whenever they want. This undoubtedly brings with it advantages. However, it also includes a major downside. Face-to-face communications – or “conversations” as we like to call them – offer key benefits that online exchanges don’t have.

Most importantly talking to someone face-to-face allows for that basic human quality – empathy. Identifying how the other person is feeling and responding to this by adjusting your message and your behaviour is as essential in business as it is in every other aspect of life.
All of us know this from our own experience but now psychologists are increasingly able to back it up with science. A recent study in the US, for instance, asked four sample groups of young people to communicate with one another in different ways: face-to-face conversation, video chat, audio chat and online messaging. Participants were subsequently taken through a questionnaire to gauge how emotionally connected they felt to the person with whom they were communicating. The results showed that those who communicated face-to-face formed significantly stronger bonds than any other group. Those who communicated by online messaging performed worst.

Similarly, other studies reveal that teams that work together in face-to-face situations consistently produce better results than those using online collaboration tools.

Another study showed that children who have been through a stressful situation such as an exam or a public performance, relax and see their thinking return to normal more rapidly when they talk in person to their parents rather than via technology. A supportive text from a parent, for instance, was shown to have almost no effect here.

So what does this tell us about the prospects of success for Goldman Sachs’ move to online performance reviews? Well, research shows that online communication can actually diminish our capacity for empathy. Clifford Nass, a professor of communications at Stanford University, and author of The Man who Lied to His Laptop: What Machines Teach Us about Human Relationships revealed in a number of experiments that when people regularly replaced face-to-face communication with online interactions their ability to read the emotions of others was diminished.

“The way we become more human is by paying attention to each other,” Professor Nass wrote an article in The New York Times in 2010. “It shows how much you care.”

Face-to-face communication is one of our most basic needs. It’s hardwired into our cognitive and emotional circuitry. Online interactions clearly have certain advantages but far from being an improved method of communication, their inability to convey real empathy and the stress that its absence involves can actually damage relations between employees and reduce efficiency. The fact is, that technology can’t provide a complete alternative to, let alone an improvement on, a face-to-face conversation because the latter contains essential features that it simply can’t replicate.

It’s often said that “It’s not what you say, it’s what people hear.” When we talk to somebody face-to-face we’re presented with constant, immediate reactions that we can use to make real-time adjustments to our messages, our language and our manner. Written online feedback can’t do any of this. As a result, when it’s finally received, whatever it was intended to convey and however well it was composed, it can become toxic.

Conversation requires both parties to be in listen-and-respond mode. When talking human to human, it’s difficult not to give the other person the attention they deserve. Even when we disagree with someone, in a face-to-face conversation we’re more likely to have a rapport with them.

In a conversation, you have the right and the ability to reply instantly and to seek clarification immediately. Written communication doesn’t allow for this. Looking at feedback on the screen when there is no sense of tone, no context and no opportunity to respond or to seek clarification. This creates a spike in stress that has no outlet.

Conversation is generative, it’s productive. Conducted properly it can harness the thoughts and capabilities of those taking part. Although both parties will very possibly have an opinion beforehand, neither has complete control over the final outcome. This might be a frightening prospect for some people but it shows how both of those taking part have a vote that is equally valid.

It’s often tempting to send a text or email to avoid what could be an awkward conversation.
Of course, conversations can be awkward, messy, unpredictable and strewn with pitfalls.

The fact is, that conversations are, at the same time, the most fundamental and sophisticated form of human communication. The information that they can convey is more subtle and comprehensive than anything available through online technology.

That is probably why enlightened corporations are training their future leaders in the art of conversation. Goldman Sachs, take note.

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