Now this post is a bit longer than normal, but I hope that the 1^st quote grabs you and sucks you in…I reckon that once you start you won’t stop 

“Performance evaluation is an exercise in futility” (Scholtes)

Every organisation operating a ‘command and control’ management system uses the performance appraisal as a key tool in its arsenal.

The contention in this post is that one of the key steps in providing an environment that fosters a highly motivated and capable workforce is to scrap the performance appraisal system and replace it with something far better.

Problems with performance appraisals

Let’s first consider just some of the problems with actually carrying out what might be considered a valid performance appraisal of an individual – that’s you and me:

• Appraiser Bias: Performance assessments tell us as much about the appraiser as the appraisee. It tells us how harsh a critic the manager is, how good a job he/she expects the employee to do, how well the two of them get along, what basic values they share and even whether their backgrounds are similar; 

• Management performance: The quality of management has a huge influence. “any individual’s performance is, to a considerable extent, a function of how they are managed…so the manager is in part evaluating him/herself without appearing to do so.” (McGregor) 

• Interdependence: None of us act alone. “Almost nothing is accomplished by an individual operating alone. Most work is obviously a collective effort. Yet even workers who seem quite independent depend on others for ideas, stimulation, feedback, moral support and administrative services.

When an individual makes some heroic effort and accomplishes an extraordinary task, often he or she can take the time to do that work only because others have filled in on the less heroic parts of the job. When someone is credited with a success, he or she is individually honoured [e.g. by money, award, public acclaim] for what was most likely the work of many.” (Scholtes)

• The effects of the system: Deming used his famous red bead experiment to illustrate this point simply yet brilliantly. He explains that the performance of the employee is 95% governed by the system that they work within. The ranking of people is actually merely ranking the effect of the system on the people. 

“It is simply unfair to the extent that employees are held responsible for what are, in reality, systemic factors that are beyond their control.” (Kohn)  

• A straight jacket: Appraisals ‘compare’ everyone against a uniform expectation (albeit per manager – see 1. above) rather than understand and embrace the reality that everyone is unique, with very different (often subtle) contributions to make.

Deming wrote the wonderful words that “a [true] manager of people understands that people are different from each other. He [or she] tries to create for everybody interest and challenge and joy in work. He tries to optimise the family background, education, skills, hopes and abilities of everyone. This is not ranking of people. It is, instead, recognition of differences between people, and an attempt to put everybody in position for development.”  

• Ignoring variation: The work of each individual is characterised by variability…it will naturally fluctuate! You cannot be the same every minute of every day….if you were, you would be a machine! Further, the major causes of such variation are beyond the attributes of the individual. So should you be criticised or praised because of ups and downs in your supposed ‘performance’ outside of your control?

I could go on…but I fear that I would write a book!

The performance appraisal creates the illusion that management have indeed isolated and determined the performance of an individual. Worse still, it allows management to abdicate their responsibilities – they will simply meet the person each period, get the person to justify themselves (with evidence!) and then judge them….no need to actually get to understand who they are, what their dreams and aspirations are, and therefore discuss how they can help them become reality.

The effects of performance appraisals

Most organisations running performance appraisal systems will answer back in denial: “yes, we know all about the above and we have ‘continuously improved’ our process through much iteration so there’s no such problems here!”

I would contend that they may have succeeded in creating a (laborious, bureaucratic and wasteful) process that masks (i.e. disregards) the above, but they cannot remove them.

But, for the sake of argument, let’s just suppose they have….what about the effects of the performance appraisal:

[the system by which merit is appraised and rewarded is] “the most powerful inhibitor to quality and productivity in the Western world….it nourishes short-term performance, annihilates long-term planning, builds fear, demolishes teamwork, nourishes rivalry…and leaves people bitter.” (Deming)

“Even if performance appraisals were adequate to gauge how well people were doing their effects are usually so destructive that they shouldn’t be used anyway. Not only is the fact of interdependence in the workplace ignored, but people are discouraged from cooperating in the future.” (Kohn)

“Appraisals leave people bitter, bruised, despondent, dejected, feeling inferior, some severely depressed.” (Seddon)

What do people running performance appraisals say they are for?

Rather than simply looking for a new technique to continue with the old flawed logic, let’s consider why people are being evaluated.

Kohn notes four ‘defences’ as being used by those that contend performance appraisals are required. They say they are needed to:

1. Determine how much each employee should be paid and/or who should receive various awards and incentives;
2. Make employees perform better for fear of receiving a negative evaluation or in the hope of getting a positive one;
3. Sort employees on the basis of how good a job they are doing so we know who to promote; and
4. Provide feedback, discuss problems, and identify needs in order to help each employee do a better job.

Taking each of these in turn, and using some of my previous posts so that you and I can finish this post today!!…

Regarding 1: Please read the following posts already on the blog that debunk the use of contingent rewards: The Chasm and Money as pay

Regarding 2: Please read Oh no, not that old theory and Making a wrong thing righter that explain why ‘carrot and stick’ approaches to motivation are counter-productive.

Regarding 3: Please read Anointing heroes. Further, there is a whole post to be written on promotion (I’ll add it to my list!). It’s not a good reason to carry out performance appraisals.

Defences 1 – 3 are about doing things to people…which leaves 4 as the only one which could be about working with people….mmm, if we got rid of 1 -3 then this is sounding promising! Read on.

So what should we replace performance appraisals with?

Kohn suggests that, if the over-riding purpose is to foster improvement (for the individual, and for the organisation) then the following principles take shape:

• A two-way conversation:
  • An opportunity to trade ideas and ask questions;
  • NOT a series of judgements about one person pronounced by another;
• A continuous process, rather than a time bound event (e.g. annual, quarterly);
• It never involves any sort of relative ranking or competition (no scoring!);
• It is utterly divorced from decisions about compensation
  • “Providing feedback that employees can use to do a better job ought never to be confused or combined with controlling them by offering (or withholding) rewards.” (Kohn)
  • It is “foolish to have a manager serving in the self-conflicting role as a counsellor (helping someone improve performance) when, at the same time, he or she is presiding as judge over the same employee’s salary” (Meyer)

Essentially, Kohn is arguing for good old fashioned regular and meaningful conversations between employee and manager within an environment of openness and mutual trust. I’ll have some of that!

Scholtes takes this further: Performance appraisals focus on the wrong target! The true opportunities for improvement are in an organisation’s systems and processes, rather than individuals or groups. Instead of focusing on individuals, managers should be working with individuals to focus on the problems with the system.

It’s worth noting that an organisation taking the above seriously won’t be able to move to this highly desirable state overnight: Once the scoring, ranking, rating and rewarding has been stripped out, it will take a bit of time for managers to establish the trust of their employees.

On the plus side, the vast majority of managers will relish the removal of the hugely wasteful processes and painful conversations of the old way…and will really enjoy spending the newly created time actually helping their team.

What about the advice from all those expensive consultants?

You will find queues of expensive consultants who will tell you otherwise.

Scholtes notes that most ‘research’ on performance appraisals consists of opinion polls asking “which kind of performance appraisal do you prefer?” They are usually:

• conducted by consulting companies selling their ‘Human Capital’ services;
• filled out by HR managers who, as a group, are predisposed in favour of performance appraisal…no disrespect meant but it is, after all, a major part of their (current) job; and then
• sent back out to the same group of HR managers in glossy consultancy report format along with a nicely worded proposal as to how the consultancy can help implement what they now claim to be ‘best practise’ and move them up some supposed ‘maturity curve’!

Scholtes notes “when biased people ask the opinions of biased people, the results cannot be described as research.” This quote is so relevant to many a ‘big consultancy’ report purporting to be ‘research’.

…and finally: what do the Japanese do?

A really nice story from John Seddon:

“I was asked to write an article exposing the problems with performance appraisals for a Sunday newspaper. I submitted my 1^st draft.

• The editor suggested I should provide balance by talking about what to do instead.
• My response was that you don’t need to find an alternative to doing a bad thing – you should just stop doing it!
• The editor said ‘ring your friends in Japan and find out what they do’.
• …so I did.
• I asked ‘what do you do about performance appraisal?’
• The reply was ‘what is that?’
• …I explained.
• Japanese people tend to be too polite to laugh.”