Abolishing Performance Appraisals
I’ve recently re-read the book titled “Abolishing Performance Appraisals – Why they backfire and what to do instead” by Tom Coens and Mary Jenkins. This is one of my favorite books on the short-comings of traditional performance management processes, in particular the performance appraisal process (also called performance review or employee appraisal). I think it’s well-written, making the argument very convincing. I’m going to summarize it in this blog post so you can use this information to enhance your performance management processes inside your company.
Before we get started, here is the description of performance appraisal as explained by the authors. Performance appraisal is a process or tool that includes most or all of the following:
- Employees’ work performance, behaviors, or traits are rated, judged, and/or described by someone other than the employee.
- Such ratings, judgement, and descriptions are related to a specific time period (i.e. a year).
- The process is systematically applied to all employees or a class of employees
- The process is either mandatory or induced by an extrinsic incentive (e.g. eligibility for pay raise) as opposed to a process that is purely voluntary or elective.
- The results of ratings, judgements, or documentation are kept or preserved by someone in the organization other than the related employee.
The above definition describes performance appraisals, but it doesn’t tell us its purpose. A performance appraisal usually intends to have six different functions:
- Improvement: helping both the employee and organization to get better results
- Coaching & Guidance: managing tool and framework for coaching, counseling, and motivating employees
- Feedback & Communication: enhancing communication between employee, supervisors, and others inside of the organization
- Compensation: Tying pay for performance (Salary increases & bonuses)
- Staffing Decisions: Making fact-based decisions regarding promotions, layoffs, or identifying training needs.
- Termination and Legal: Identifying and documenting discharge decisions
The intended functions of the appraisals may make it appear that appraisals are needed. But do appraisals really work? A survey by Society for Human Resource Management found that more than 90% of appraisal systems were not successful. Another of their surveys revealed that only 5% of H.R. professionals were ‘very satisfied’ with their performance management systems. The authors claim that appraisal don’t fail because of the poor design of the process or poor execution, they fail because the underlying assumptions are defective. Some of these underlying assumptions are:
- Assumption: One process can effectively serve all intended appraisal functions for all employees
Defect: Different people, situations, and teams require different processes and styles to enhance performance
- Assumption: Managers are responsible for employee feedback, development, and performance
Defect: Empowerment is promoted as an organization value yet the supervisor, not employee, is the driver of feedback and improvement
- Assumption: Ratings are motivating and let people know where they stand
Defect: Ratings are not motivating because everyone expects to be rated highly and have their efforts appreciated
- Assumption: Feedback and performance improvement are annual (or quarterly) events
Defect: Feedback should be available continuously at all times and not a calendar-driven event. A culture that encourages everyone to seeks feedback when need should be promoted
- Assumption: People withhold effort if they feel they are not being extrinsically rewarded
Defect: Research shows that extrinsic rewards is demotivating and kills intrinsic motivation. Focusing on creating meaning and joy at work unleashes intrinsic motivation.
Appraisals do not motivate us and destroy human spirit. It’s subjective, formal, forced, too late, and focused on extrinsic motivation that does not get us committed to organizational goals. So what can we do instead? The authors claim that we need to decouple the different functions of the appraisal and focus on creating new empowering processes to meet each function, such as:
- Improvement: focus on improving performance at a team or organization level by making company goals visible and aligning everyone to company objectives.
- Coaching & Guidance: drop mandated ratings and evaluations to allow supervisors to partner with employees and mentor them on a continuous basis.
- Feedback & Communication: Create a culture where everyone is responsible for gathering their own feedback whenever they need it from whoever they trust, without worrying that it would be stored in the employment files.
- Compensation: Pay people fairly based on market rates and get their focus away from pay. Work on creating environment where people get meaning and joy from what they do.
- Staffing Decisions: Partner with people to implement career management and development programs that are executed in a supportive environment.
- Termination and Legal: Deal with poor performers separately and find the best counseling method based on the employee and the situation. Coach the employee in or out of the organization gracefully. This will also lower chances of terminated employees filing lawsuits.
As explained above, partnering with employees and creating empowering performance management processes, together with a supportive culture, unleashes the human spirit and allows your organization to benefit from having a loyal and motivated workforce. If you are interested in learning more, I recommend you get a copy of Abolishing Performance Appraisals. Below is a cheat-sheet I created while reading the book that summarizes the main points of the book. Feel free to print a copy and use it to improve your company’s performance management processes.