Here is an excerpt from an article written by Jinseok Chun, Joel Brockner, and David De Cremer for Harvard Business Review and the HBR Blog Network. To read the complete article, check out the wealth of free resources, obtain subscription information, and receive HBR email alerts, please click here.

Illustration Credit: HBR Staff/Schreiber Sons/NYPL

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People hate performance evaluations. They really do. According to a survey of Fortune 1,000 companies done by the Corporate Executive Board (CEB), 66% of the employees were strongly dissatisfied with the performance evaluations they received in their organizations. More strikingly, 65% of the employees believed that performance evaluations were not even relevant to their jobs.This is unfortunate considering the amount of resources that organizations devote to conducting performance evaluations. CEB research says that when we take into account how much money organizations are investing in their performance appraisal technology and how much time managers are spending to evaluate their employees, on average U.S. organizations spend $3,000 per year, per employee. This implies that billions of dollars are spent across the country because more than 90% of American companies provide performance evaluations at least once a year.

Why are employees so frustrated about the way they are evaluated, despite all the time and money being spent on these evaluations? What are organizations missing?

We believe that one clue lies in the fact that 71% of the American employees thought that their evaluations had problems in the domain of fairness.Fairness is at the heart of enhancing employees’ work experiences. It begets numerous benefits such as employees’ satisfaction with their jobs and commitment to their companies. In the context of performance evaluations, when people believe that the outcomes of their evaluations are commensurate with how well they performed, they are likely to consider the evaluations as fair. But there is so much more that goes into people’s perceptions of fairness.

Specifically, employees perceive the fairness of evaluation processes when they feel included and respected. They also consider it fair when their evaluations are accurate and are conducted based on ethical and moral principles.

When employees perceive fairness in the evaluation processes, they are more likely to accept their evaluations, in which case they will digest the information contained in the evaluations and motivate themselves accordingly.Then, the remaining question is this: what are the specific things that organizations can do to increase perceptions of fairness during the process of performance evaluations? Our research, recently accepted for publication in Organizational Behavior and Human Decision Processes, suggests that an important driver of the fairness in performance evaluations is the reference point managers use to appraise their employees’ performance. Specifically, in four studies based on the data collected from 1,024 American and Dutch employees, we compared two types of reference points.

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Here is a direct link to the complete article.

Jinseok Chun is a PhD candidate of Management at Columbia Business School. He studies the upsides and downsides of using competition as a means to heighten employee drive and performance. He has published articles in leading academic journals including the Journal of Applied Psychology, the Journal of Personality and Social Psychology, and Organizational Behavior and Human Decision Processes.

Joel Brockner is the Phillip Hettleman Professor of Business at Columbia Business School. He is a leading authority on a variety of psychological issues in the workplace, including change management, leadership, decision-making, the role of the self, and cross-cultural differences in work behavior. He has published four books, including his most recent and award-winning book, The Process Matters.

David De Cremer is the KPMG professor of management studies at the Judge Business School, University of Cambridge, UK, a co-founder of the One Belt One Road research platform at Cambridge, and a visiting professor at Peking University HSBC Business School, China. Before moving to the UK he was a professor of management at China Europe International Business School in Shanghai. He is the author of the books Pro-active Leadership and Huawei: Leadership, culture, and connectivity.