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What’s Wrong With Performance Appraisals?

Submitted by  on February 16th, 2012

Performance management appraisal formMore and more managers are becoming increasingly frustrated with the traditional annual employee appraisal cycle. Managers don’t have time for them, they have a tendency to fray employee-manager relationships and they don’t help the organization reach its strategic objectives. In a recent article on attitudes to performance appraisals, I pointed to evidence that employees, managers and HR folk are rejecting their performance appraisal systems in droves.

What’s wrong with the usual appraisal system? They are designed and rolled out with the best of intentions. How did they get so far off the tracks? Here is my summary of the key reasons most traditional employee performance management systems fail to get and maintain the respect of the people using them.

Rater Errors

The usual errors from appraising managers include halo effect, recency bias, contrast effect, and so on. These types of rating errors are now well-researched and documented.

Lack of Feedback

The annual appraisal is sometimes an excuse for giving no meaningful feedback to the employee between appraisal meetings. Or worse still, it is some managers’ normal way of operating.

Emotionally Charged

With no feedback given throughout the year, emotional tension builds like a crescendo. Some managers then use the once-a-year event as a huge mallet with which to bludgeon the employee.

Ignores Systemic Deficiencies

Some 80% of performance shortfalls are due to failures in the organization’s systems and processes. Focusing almost exclusively on individual performance is diverting attention from the real causes of poor performance.

Disregards Teams

Achieving outcomes is the result of the collaborative interactions of many employees working to a joint purpose. Putting the spotlight on the individual misses the importance of getting team interactions right.

Financial Incentives Distort Performance

Rewarding employees financially often skews behaviors towards non-optimal performance. Dysfunctional behaviors include withholding information, manipulating goals and performance data, starting rumors against peers, and so on.

Financial Incentives Ignite Emotions

Awarding bonuses and the like often takes the primary focus off goals and behavior and puts it onto status symbols, such as salary and perks, that generate high emotions.

Financial Incentives Generate Complacency

Giving monetary rewards often leads to an expectation that next year’s reward will at least match this year’s. This year’s bonus can become next year’s entitlement.

In a future post, I will outline what I think an effective performance management system looks like. What other problems have you experienced plaguing the traditional performance appraisal? What did you or your organization do to fix the problems? Please share your stories here.

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Posted in Performance | Comments (13)

13 Responses to “What’s Wrong With Performance Appraisals?”

  1. Sue James Says:

    A great post, Leslie! Your list of issues definitely resonates for me as well. And thank you for inspiring a reflection of my own on the alternative – i.e. a positive approach to performance appraisal, using appreciative questions to produce a deeper, more reflective and more meaningful conversation for manager and employee alike. I’ve just completed a blog post on our BJ Seminars International website about it. :)

  2. Leslie Allan Says:

    Hello Sue, Yes, we can all learn more about applying Positive Psychology to the way we conduct employee performance reviews. Many managers still see the review as a means of punishing employees they don’t like instead of a way to build the relationship, share common goals and work together for a better future.

    Regards, Les Allan

  3. Karen Carleton Says:

    Les,
    Great link to Positive Psychology. Appreciative Inquiry advocates also believe in building on strengths at all levels in organizations.
    Karen

  4. Leslie Allan Says:

    Thanks Karen, I’m an advocate of Appreciative Inquiry and I’m pleased to say that two of my associates, Sue James and Chris Bennett, are very active in the AI movement. They conduct regular workshops on AI, which are excellent, and Sue actively runs the Australian AI web site http://appreciativeinquiry.com.au/

    I think HR performance management system architects and managers can learn a lot from AI and I thank you for your positive words.

    Kind Regards, Les Allan

  5. Mary Gray Says:

    Everything in this article rang so true that I felt like it written about some of the appraisals I have given and received. The only things missing were performance appraisals given after the company has announced that there will be no raises. I have felt like a moron for praising staff, setting goals for the next year, and knowing that it really does not matter what score I get or give. No one will get one cent extra for their hard work.

    It makes the appraisal seem like a hugh waste of everyone’s time.

  6. Leslie Allan Says:

    Hi Mary, Thanks for sharing your experiences. Yes, that’s the danger when the prime reason given to employees for appraisals is to decide the winners and losers in dividing up the financial cake. When the cake disappears, the reason for motivation disappears with it. Yours is a great example of how performance appraisals can lead to a lowering of motivation.

    Kind Regards, Les Allan

  7. Siva Edupuganti Says:

    A great article about the problems with performance appraisal. We are trying to solve exactly the same problem with our solution.

    I’d be interested to hear your opinion on a solution which integrates performance management with everyday activities, over a social platform. Activity integration ensures real-time goal alignment and contextual feedback making it a continuous process. Social platform enables real-time 360-degree feedback and recognition, within a thriving work network. All the activities accomplished, results achieved, feedback and recognition received are used to create an employee performance profile, which forms an objective basis for appraisals.

    Can this solution address the first four key reasons – Rater Errors, Lack of Feedback, Emotionally Charged and Ignores Systemic Deficiencies?

  8. Leslie Allan Says:

    Hi Siva,

    I think software can help. However, it is not an automatic solution. And I’ve seen many companies go down the road of thinking that when we implement this latest piece of software, all problems will disappear.

    Performance management has a very heavy social and personal component. The errors I speak of can be institutionalized through how managers and employees use the software. I mean, a car is a very valuable tool for getting around, but in the hands of the inept and malicious, it is a killer.

    Kind Regards, Les Allan

  9. Siva Edupuganti Says:

    Hi Les,

    I completely agree that software cannot solve the problem by itself. It can only come after the appropriate process in put in place. However, wouldn’t the solution help implement the process change effectively, and ensure the process gets ingrained into the day-to-day functioning of the organization?

    Thanks,
    Siva

  10. Leslie Allan Says:

    Hi Siva. Yes, I agree that software can help implement the changes. The prime driver still needs to be the management team.

    Your reference to the software being the “solution” does not help, I think, the management team facing up to their responsibilities in leading the change and walking the talk.

    However, we are agreed that software can help systematize processes.

    Kind Regards, Les Allan

  11. Karen Says:

    Les,
    A more fitting title for this post may have been, “Performance Appraisals: What’s right with them?” (met with a silent answer it seems). Let’s trust we can do a better job of engineering and supporting workforce performance than simply trying to “manage” it.
    Karen

  12. Leslie Allan Says:

    Hi Karen. Yes, there may not be much right with traditional performance appraisals. I think a lot of the problem comes from the fact that they are largely reactive. I think you’re right that if we pay less attention to managing individual performance and more to our systems of work, we would all be a lot more productive and satisfied.

    Kind Regards, Les Allan

  13. Mitchell Morrison Says:

    And I do not think that performance appraisals need to be reactive. Instead of the traditional once or twice yearly review, why do them quarterly or monthly? Why not catch people doing something right and put that in the performance appraisal?

    Rater errors will always happen. After all we are human. Why not establish measurable behaviors and rate on a 3 point scale, Achieved, not achieved and partially achieved?

    I also believe that systemic culture has a lot to do with a person’s performance. It is not uncommon to send people to training, and then find that the internal processes and procedures prevent them from utilizing or fully utilizing them. How can we change to culture so that it has a more positive effect on a person’s performance?

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