Management

Is The Traditional Performance Appraisal Dead?

It seems you cannot pick up a Human Resources professional journal these days, or even the business section of a major newspaper, without spotting an article touting the benefits of eliminating the traditional annual performance appraisal. In fact, recently entire books have been written endorsing its elimination. The experts attack the traditional performance appraisal system with a zeal and passion I have not seen before. In many ways, I interpret their attacks as bordering on the irrational. I welcome challenges to the status quo . And change is important to stay current. But I recommend caution when considering complete elimination of a fundamental and key tool for managers and staff alike.

There are many generalizations made about performance reviews. One such notion is that all traditional performance appraisal systems are flawed. I see this in many of the books and articles I have read on the subject. Yet, where's the data? I believe that while the traditional system has problems, they are exaggerated and oversimplified by the proponents of a new-age performance feedback system that lacks accountability. The experts throw out the proverbial baby with the bath water, failing to recognize that the traditional system, though it has some weaknesses, can still work effectively. I contend that the movement away from the traditional review is a dangerous one, and may lead us down the road of low or no accountability in business. In this article, I will explore this trend and the reasons for it, the alternatives to the traditional review as advocated by the "experts," the dangers inherent in eliminating it, and a common-sense solution for bringing the current performance review process into the twenty-first century. The allure of a management job without having to write a performance review is strong. However, in the long run, this migration away from a tried and true system will cause more problems than it purports to fix.

The Flawed System

First, let us explore what I think is a gross generalization and mischaracterization about the review process, ie, that it is deeply flawed.

Quite candidly, if the traditional performance review obligation were removed unilaterally from all managers, you would likely hear a collective cheer throughout the country. Why is it such a hated process? Because most managers go about it incorrectly, and businesses simply do not train on the proper methodology. We get bogged down in the completion of the form and the process, as opposed to recognizing the inherent benefits of a good review. We view the form not as a means to an end, but an end in itself. Whether you write the performance review on the back of a matchbook or on an official performance review form really makes no difference. The differentiator is in the time it takes you to consider and write the review, the amount of input from the associate for whom the review is being done, and the qualitative performance discussions that are part of that review. These all demonstrate that you care about the individual's career development. The problem is exacerbated by the fact that, in many organizations, the review process is not nurtured, nor is it encouraged. It is viewed mainly as an obligation for managers. It is not uncommon to hear managers groan at the end of the review year, " Oh no! It's review time again. Where am I going to find the time to get all of these reviews done ?" Human Resources departments are charged with ensuring that managers meet their performance review commitments. They routinely chase after managers and literally beat them up to get reviews done. In many cases, no one, other than the manager writing the review and the employee receiving it, ever takes the time to read the review. And since managers do not take it seriously, they often " pencil-whip " their way through the process. Thus, employees on the receiving end do not put much stock in it. So, the first reason the so-called experts use as a rallying cry for the elimination of the review is that no one takes it seriously. Is it any wonder?

Another reason for the movement away from the traditional review is the assumption that, in its current form, the process does not encourage parties to engage in a dialogue about the relevant performance issues. The pundits argue that the process is " boss-dominated, " and does not allow for any give-and-take or exploration of performance areas that can be improved. I have no doubt that there are bad managers who merely go through the motions of writing and discussing a review. They quickly dispatch their management obligations by coercing their associates to sign the written form. Indeed, as a Human Resources manager, I have actually had to deal with such types. But that does not mean the system is flawed. It merely means that it is not implemented properly, and that managers themselves are not held accountable for productive reviews.

I have read that the performance review process needs to change because of the nature of work and the workforce, which is markedly different from that of the 1990s and earlier decades. Related to this is the handy excuse that Generation Y and the Millennials do not react positively to the traditional review. They grew up in a world of collaboration and cooperation; they do not work well in an environment that points out flaws with little constructive advice and guidance. (This is how the naysayers of the traditional review describe our current performance appraisal process.) I agree with this position to a point. Yes, unlike other generations, Generation Y and especially Millennials, were taught to collaborate and cooperate beyond that which the older generations were. However, I believe that, depending on how they were raised and the schools they attended, they were still held accountable, and were taught the benefits of good performance. They want and need good feedback. And, as an aside, I am less inclined than many of my HR contemporaries to draw a distinction between the older and younger generations. All generations want more quality collaboration, cooperation, and constructive feedback. Perhaps it is the younger generation that is causing us to see this reality with more clarity than before. I have personally experienced that they no longer want to wait for the annual review for feedback; they want instant gratification. That is actually a good thing. I do not have a problem with this change in our workforce and their desire for more immediate feedback. But a good appraisal system, even under the old traditional framework, will not work effectively unless there are touch-points on performance throughout the year. This is not a new concept. The critics insist that these touch-points were never part of the traditional review process. Not true.

Another knock against the review is that it is a system geared to finding fault and laying blame, as opposed to a balanced approach that explores both achievements and shortcomings. Here again is yet another bad assumption that companies are not using a balanced approach with the current system. I am a devoted disciple of Ken Blanchard. In fact, I preach and teach about many of the things he recommends in his many leadership books. In The One-Minute Manager [1], Blanchard discusses something known as the " 1-minute praise " and the " 1-minute reprimand ." Essentially, good managers do not wait until the annual review to discuss performance challenges. Blanchard encourages managers to do so at the time of the infraction or performance shortfall. Blanchard's book was first published in 1981. Forward thinking companies have been using this approach for years. True, bad managers do not use this approach. However, thirty years of Human Resources experience tells me that bad managers who do a poor job with the current allegedly flawed appraisal system, will likely also be bad managers under any system adopted. The key is to teach your managers to be good at evaluating and assessing performance, regardless of the system used. The solution will not be found in a new system, or any system, for that matter. The answer is in the commitment of the organization and its leaders to the performance appraisal process.

The critics of the traditional review are also quick to point out that the bureaucrats in Human Resources do not even review the performance appraisals before they are put into employees' personnel files. While I have no doubt that this happens in some organizations, you cannot make a broad sweeping statement like this. Before I moved into my current role, I personally would review all performance appraisals (approximately 300) before our managers would even sit down and discuss them with their associates. The critics go on to say that Human Resources is only concerned with identifying those areas in reviews that could be potential legal landmines. This is also not true. I would routinely identify areas where performance scores were either very low or very high. I would then follow-up with managers to ensure that they elaborated and provided specific examples in review meetings to substantiate those ratings.

They say that the performance review is a process of looking back, not forward. Reviews are not current, and they do not focus on goals, we are told. Every performance appraisal system I have implemented in my career has had a section on goals for the next review period. They included scheduled touch-points throughout the year to ascertain if mid-course corrections are needed on those goals. And the review process I used was indeed collaborative. Employees were asked to give consideration to those things they want to do or want to learn. Managers aligned those with the objectives laid out for them by their superiors in their annual business plan. The new goals had to be grounded in reality; they needed to help the department meet its goals and the goals of the business. Professional development goals were also part of this process.

I can go on and on with other examples about the misperceptions of the current appraisal system. In the interest of brevity, however, I will move on to discuss what the so-called experts recommend as an alternative to the traditional system.

The Experts' Alternatives

New performance review systems remind me of a failed scholastic movement back in the 1970s to eliminate or severely curtail the use grades for students. It gained no traction simply because the more clearly minded individuals in academia realized that there is only one way to hold people accountable: they need to be graded on their performance. This is just as true in business as it is in school. Essentially, informal systems are encouraged in which there would be no pressure on managers to complete official evaluation forms. Managers would schedule informal meetings throughout the year, along with more formal meetings if any performance challenges become evident. This system, they say, will result in a more effective critique of performance, and open up an engaging dialogue between managers and staff.

Let us examine how such a system would work. First, let me give the devil his due: in an ideal world, some of the alternatives proposed would work just fine. They would, in fact, provide great feedback on performance, and enable managers and associates to identify and correct shortfalls and behaviors. The obvious problem, however, is that we live a world that is far from ideal. In their utopian vision of business, everyone runs around throughout the year having these informal conversations.

The Dangers

The dangers and pitfalls of the proposed system are many, and are often overlooked by those pushing for an alternative. First and foremost, and the thing that is most troublesome to me, is the lack of accountability, both on the part of managers and employees. Under the new system, no one appears to be held accountable for a myriad of things: getting the review meetings done, documenting any issues that may arise, following up, and advising the employees on the receiving end of informal negative feedback what their responsibilities are going forward. Nothing is signed and nothing is memorialized. Therefore, where is the incentive to change and / or improve performance?

Next, there is no historical record of performance. That could be crippling to a new manager taking over a department. How will new managers learn about their teams, about what they are capable of, what they have accomplished, and where they have fallen short?

Let us not forget about employment lawyers. The sharks are waiting at every corner for employers to make mistakes and miscues. The critics conveniently gloss over this reality. I have learned first-hand that lack of performance documentation can and often does lead to large legal judgments against organizations. It is a sad reality that we live in an ultra-litigious society. But it is indeed a reality. I am not suggesting that performance reviews be written for the sole purpose of providing a legal defense. And I will admit that some managers will take this approach, padding the file in the event of litigation. But a good, well-written, traditional performance review, with its primary purpose geared towards objectively measuring performance and setting goals, will naturally lend itself to a good legal defense if needed.

How do we differentiate performance amongst our staff without quantifying it? And if we do not quantify it on a review form using a standard formula, how do you justify the awarding of different salary increases and bonuses? Any discretionary awards without a foundation in objective review scores will be viewed as arbitrary. And, though I am hesitant to bring the lawyers into our discussion again, we have to face the reality that plaintiffs' counsel would seize on this as an opportunity.

The Solution

I do not want to be a critic without offering alternatives. So, what type of performance system do I envision as effective for all generations of workers in the current business climate? At the risk of oversimplifying, I would simply augment the traditional performance review. My system would include the following action steps

  • Approximately one-month prior to the annual review date, invite employees to begin to consider their performance for the preceding twelve months. Employees are asked to:
    • Give thought to how well they met (or did not meet) their objectives, and why.
    • Consider how they would rate themselves on the performance factors on the review form (using the same rating scale that the manager will use). I would make this step optional, and would not require that employees share their ratings with the managers who are doing their reviews.
    • Consider what they perceive as their successes and failures; things that they believe they did well, and those things on which they faced some insurmountable challenges.
    • Review their job description to determine if anything about the job has changed, and whether the description needs to be amended to reflect those changes ( which in turn will impact go-forward goals ).
  • Approximately two weeks prior to the review date, hold individual meetings with employees. Ask employees to speak candidly about all of the things you asked them to consider. The managers' goal is to listen, not to judge, critique, or respond; simply to make note of the employees' feedback about their own performance.
  • Using data managers collected throughout the review year, along with feedback provided by employees in the first meeting described above, develop scores and commentary about the their performance. Then develop an outline for a discussion based on:
    • Those performance factors as rated by the employee about which you disagree.
    • The reasons for not achieving goals.
    • Changes to the job description.
  • On or about the review date, meet with the employee second time. At this point, the official review form has not yet been completed. This next discussion will focus on the three areas described in the above step. Managers will discuss each of the problem areas candidly and openly. They will keep an open mind to determine if there are any mitigating factors that may cause them to change their initial review scores.
  • Managers finalize the official review forms and send them to employees to review. Employees are instructed to review it, and if they believe further discussion is necessary, to schedule a time.
  • Several days after the review is signed and finalized, using the employees' thoughts about goals for the coming year, a separate meeting is held to discuss those goals in a collaborative fashion. Once finalized, these will be appended to the official review, which has already been signed.
  • Mandatory touch-point conversations suggested earlier are to be held at least once per calendar quarter. They will be documented and placed into employees' files. A copy will be given to employees.
  • During the course of the review year, managers should maintain a file on each of their associates. Each time there is a significant performance event, praise from a client, a superior or a peer, every time there is a performance shortfall or a goal not met, the employees are spoken with and the files are documented. Then these files are used as the foundation for the next performance review. Since employees want relevant information in the review and in the touch-point conversations, specific examples are important when discussing performance. With this file, you will have a full-year worth of examples.
  • And lastly, in accordance with Blanchard's One-Minute Manager philosophy, managers deliver specific feedback when something happens. They do not wait for the quarterly touch-point conversation or the annual review.

With respect to a discussion of salary increases (or lack thereof), it is vital that these be held in a separate meeting. If you attempt to comingle performance and compensation discussions in the same meeting, employees are likely to focus only on the money. If you hold the money discussion at the end of the meeting, you risk the employee not participating in a constructive review conversation. They are likely to be focused on the end of the meeting, waiting for the increase to be awarded. If you hold the compensation discussion at the beginning of the review meeting, employees will likely be preoccupied with the increase already awarded, and not hear much of what will follow about performance.

Is this easy? No. Is it time consuming? Absolutely. But I believe that with this system you have the best of both worlds: the old system, which provides for accountability, and some of the new techniques recommended by the experts. In my career, it has worked in organizations that were committed to excellence. They were willing to spend the time and money to train managers on how performance should be evaluated. And managers were held accountable at every level for delivering quality performance reviews.

Conclusion

As I have mentioned several times, I am deeply concerned about a world where there is a lack of accountability. I cannot agree with an informal system, the primary goal of which is to make people " feel good ." Most of the alternatives that the experts offer are mere palliatives; feel-good techniques that look and sound terrific, yet in the end, lack substance.

No, the performance review is not dead. The existing performance system has its drawbacks. No doubt, there is room for improvement. But I still believe it is the most effective means of gauging, discussing, and improving performance. In the final analysis, the old and the new can meet somewhere in the middle. We have to incorporate more discussion and timely feedback into the process; more collaborative goal-setting is necessary as well.

We are living in an age where people are being told that change is necessary in many aspects of our lives and in business. We read about change on the Internet; we hear about it on the radio and on television. Change has become part of our national persona. Indeed, much change is needed in many areas. But we need to be cautious that we do not change just for the sake of it. If we tell people something often enough, they will eventually come to believe that it is true. This applies to the denigration of the traditional performance review. The articles in newspapers, magazines, and professional journals are appearing with increasing frequency. And I fear it will lead to a movement that, if adopted, will be difficult to reverse.

[1] Kenneth Blanchard & Spencer Johnson, The One Minute Manager (New York: Candle Communications Corporation, 1981).

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