Wisdom of collaborators: a peer-review approach to performance appraisal

Abstract: Individual performance and reputation within a company are major factors that influence wage distribution, promotion and firing. Due to the complexity and collaborative nature of contemporary business processes, the evaluation of individual impact in the majority of organizations is an ambiguous and non-trivial task. Existing performance appraisal approaches are often affected by individuals biased judgements, and organizations are dissatisfied with the results of evaluations. We assert that employees can provide accurate measurement of their peer performance in a complex collaborative environment. We propose a novel metric, the Peer Rank Score (PRS), that evaluates individual reputations and the non-quantifiable individual impact. PRS is based on pairwise comparisons of employees. We show high robustness of the algorithm on simulations and empirically validate it for a genetic testing company on more than one thousand employees using peer reviews over the course of three years.