Three Reasons to Dump Performance Appraisals

Garbage Bag
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Can we talk about performance appraisals?

This corporate sham is one of the most insidious, most damaging, and yet most ubiquitous of corporate activities.  Everybody does it, and almost everyone who’s evaluated hates it.  It’s a pretentious, bogus practice that produces absolutely nothing that any thinking executive should call a corporate plus.

Harsh and provocative, isn’t it? This is an opening paragraph to Samuel A. Culbert’s 2010 book, Get Rid of the Performance Review.  Dr. Culbert wrote what I’ve been thinking for a long time. And I’m not alone.

Deloitte Consulting recent surveyed over 2,500 organizations in more than 90 countries and issued a report on Global Human Capital Trends. Deloitte’s performance management research found:

  1. Only 6% of organizations believe their current process for managing performance is worth the time;
  2. Only 8 percent of companies report that their performance management process drives high levels of value, while
  3. 58% called their process “weak,” with North American companies 20% worse than the rest of the world.

So why do we continue this ineffective practice?  According to Dr. Culbert, one of the reasons is because of the perceived power it affords HR professionals as administrators of the process.

I beg to differ with Dr. Culbert on this point.  After reading Get Rid of the Performance Review, I collected additional research, prepared a business case and presented a proposal for replacing my company’s performance appraisal rating process to the executive team.  After a brief moment of C-Suite jubilation, fear set in.

The executives worried about how they would explain base pay decisions to employees, how regulators would react to a change in the performance management process, how bottom performers would be managed, and a whole host of other possible corporate calamities.  I watched as the executive team talked themselves out of changing the status quo.

Fear of change and the unknown is holding us back. And the biggest fear is how a change in the performance appraisal process will impact compensation decisions.

The good news is that viable alternatives are available. Several major companies, including Adobe, Expedia, Juniper Networks, New York Life, Motorola and Kelly Services, have reengineered their performance management processes, eliminated ratings and experienced improved business results.

Best practices reported by the trailblazing companies include:

  • Focus performance conversations between managers and employees on coaching and development for improved results;
  • Delink compensation decisions from performance and coaching discussions. Consider market and skill-based compensation determinations;
  • Simplify the process and forms to reduce administrative burden on managers.

HR’s role in performance management is not that of administrator of a broken and ineffective process. HR professionals are in the best possible position to lead a process improvement revolution.   There are ways to develop individuals and improve workforce performance without the performance appraisal processes of the past.

It is HR’s role to evaluate the current process, build a business case and lead the change.

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Comments

  1. Provocative title, but it seems to not reflect the content of the article. You are not recommending ending discussion of performance and appraisal of that same performance. It almost sounds like “performance appraisal” is a monolithic and specific process to you, done the same way at all companies, that doesn’t seem to work. The “solutions” sound like a typical performance coaching conversation. Good team leaders have these conversations all the time with employees. Good managers summarize that ongoing conversation once or twice a year and make pay recommendations on that ongoing conversation. Documenting that compensation conversation will always be best practice. To me, that is performance appraisal.

    Dave Patchin |
    Reply
  2. I agree that Performance appraisals are a nuisance. I don’t know that I’ve ever seen one that I thought actually motivated employees to improve. I’m not sure who hates them more, managers or their direct reports. My old boss had a handle on it. He would have all of his direct reports fill out their own appraisal on ourselves and he would let us know if he agreed. More times than not we were harder on ourselves than he would have been.

    Roostervomit |
    Reply

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