Performance appraisal: dump it or fix it?

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nataliehorne
Founder & Strategy Director
Prime Decision
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“Perhaps no talent management process is more important or more reviled than performance management.” Effram & Ort, 2013

In one of the most viewed documents on the web, Netflix, the streaming company with over 2,000 employees, revealed it has no mandated system of performance assessment. While this caused a flurry of interest, going process-free seems to be more of an exception than a trend; 95% [PDF] of organisations still report having a formal performance review system in place.

Is walking away the right thing to do?

As one of the world’s leading researchers on Organisational Behaviour, Professor Robert I. Sutton stated; “In the typical case (of performance reviews), it’s done so badly, it’s better not to do it at all.”

Still, throwing out the system entirely seems like a reactionary move. A more astute HR manager should have spotted the other side to this statement; to do it better.

From our knowledge of the research and best-practices, we’ve selected four big improvement themes that should help you cure your performance management process.

Evaluative vs developmental

A particularly pertinent theme within the organisational psychology research literature is the differentiation between the evaluative and developmental functions of the performance review.

Many organisations suffer from an archaic review process that is far too skewed towards ‘judging’ employee performance. The evidence suggests that this will reduce employee motivation, performance and ultimately satisfaction. Equally, these kinds of top down appraisal meetings will drive out any conversations around development – a key requirement to ensure employee satisfaction.

A survey of 700 high performers across a range of organisations found that a lack of development conversations correlated with intentions to exit. Those that felt they lacked an adequate platform to have this discussion were three times more likely to be planning to leave their organisation in the next 12 months.

Fix: Trying to cram conversations about performance past, present, future and bonuses into a single annual meeting is not feasible. Ensure the developmental conversation is not lost by having multiple meetings across the year that focus on a distinct area; i.e. objective setting, development planning and salary & bonuses.

People vs Processes

When dealing with performance reviews, it is easy to focus on the processes and forget what it is actually about – the employees. The bureaucratic process that exists within many organisations has reduced potentially valuable conversations to eternal “form-filling exercises” and everlasting “box-ticking”.

Even more telling is the negativity expressed on the manager side – senior individuals who are responsible for discussing employee’s performance, report feelings of dread in the run-up to meetings. Anecdotal reports suggest that managers may collude with employees to meet the minimum administrative requirements. The result? The fundamental issue of performance management has lost out to the goal of sending a completed form on time.

Fix: Managers need to be your performance review advocates, so involve them in process creation and improvement plans. Equally, training programmes will help give individuals the confidence and capability to deliver one-to-one development meetings, provide constructive and regular feedback, and create a supportive work environment within which your talented employees will thrive.

Individual objectives vs. organisational goals

To truly understand their own achievements and aims, employees need to understand where their goals fit within the bigger picture. Indeed, the most effective companies ensure that employees actively set their objectives within the context of organisational goals. Research has shown that employees who clearly understand the vision and mission of the organisation are more motivated and engaged in their own development.

Fix: Use content, communications, review forms and informal touch-points to continually communicate the overall objectives of the company. For example; the introductory section of a review form could provide individuals with an update on organisational priorities.

Storytelling is also a positive way to educate employees about the overarching successes and strengths of the business. Sharing stories from employees across the organisation will help to boost understanding and reinforce useful norms.

Collaboration vs. calibration

It is a sad fact that the more organisations work on trying to make performance ratings fair, the less trust employees have in the system. Forced distributions and calibration meetings aim to reduce biases in the system, but often serve to make employees feel their ratings are being ‘fiddled’ with.

Equally, if the ratings produced by these processes are ultimately linked to monetary rewards, employee satisfaction can plummet. The system will appear to be less about their performance, and more of an attempt to reduce bonus pay out. Calibration processes can also damage management relationships by undermining their influence.

Fix: Foster collaboration and participation from the employees in their own review scores. Employees will feel more satisfied with the process as a whole, have improved motivation, and will demonstrate fewer concerns about ‘unethical treatment’. If you are concerned about bias in the numbers, simply providing clearer guidance for managers will ensure their ratings are fair and in line with organisational expectations.

Don’t scrap it all

It may be easier to ditch the process then implement improvement in performance reviews, but we’d argue that it is too valuable to employee motivation, satisfaction and development to simply walk away. Positive fixes can be achieved by a thorough understanding of human behaviour and industry know-how.

Using some proven psychological insights to focus on development, turn your managers into advocates, and bridge the perception gap between individuals and your organisation, will make your performance management system irreplaceable.

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17th Sep 2015 10:47

Interesting article. Human nature leans appraisers towards the review element, particularly when performance falls below par - if something is going wrong, it requires action, hence it must be addressed. Flipside - it's going well so that's just fine, no need to discuss it. The way to deal with this is as the article suggests; encourage appraisers to focus on the individual's development. Yes look to improve below par performance but address this through personal development. AND, also focus on what's going well ... how could this go even better through development and what other opportunities could personal development offer the individual.

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17th Sep 2015 12:39

What a refreshing article! We also believe that the issue is more with the execution of appraisal than the process as such. Completely agree with the onus on year round discussions and ensuring there is a balance between development and reviewing performance. The major challenge seems to be getting everyone to value the time spent reviewing development or performance throughout the year - reducing the need for the end of year tick box that devalues the entire process. Until we can get such discussions to become valued as business as usual the problems will continue. Perhaps the key is making it employee driven, love the thought of more collaboration.

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17th Sep 2015 14:51

Thank you for sharing! Managing performance and exchanging feedback should be an ongoing part of everyday business life. Rather than do away with the annual (or twice yearly) review, the solution is to back up ongoing feedback with a more formal career conversation away from the day to day, focusing on big-picture career planning

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