Performance Appraisal Anxiety

As the year-end approaches, we see a usual spike in anxiety among our Naluri digital health and performance clients who are worried about this annual performance appraisal ritual. They worry that their bosses who are evaluating them do not fully take into account their achievements throughout the year and that assessments are laden with personal biases and lack of transparency. For managers who have to appraise their subordinates, the pressures are equally intense. They are told to force rank team members into different performance buckets: ‘exceeds expectations’, ‘meets expectations’, ‘below expectations’, with pre-defined bell-curve distributions.  

Even when there are clearly defined KPIs and ‘Balanced Scorecards’, the pace of change and priorities throughout the year render some KPIs obsolete, while important subjective values of teamwork and collaboration, ethics and integrity, curiosity and resilience are hard to evaluate. Whenever performance ratings are tied to bonuses and rewards, the KPIs and targets become intensely negotiated, silo mindsets are formed (“if it’s not part of my KPIs, why should I help the other team?”), and thousands of man-hours are used up negotiating targets and deliberating performance ratings at calibration meetings. And not where the efforts should be focused on - how do our team members keep learning and growing and fulfilling their career goals while contributing to the organisation’s core purpose and mission.

 Although many leading organisations have revamped the traditional performance management system of rating and ranking employees annually – we still find that many companies in Malaysia and the region still have this practice. Why? Because change is hard, and everyone expects others to change before they do. Mostly because Boards and CEOs still believe the illusion that having a numerical distribution of employee performance and differentiated annual bonuses somehow will lead to better performance.

 There are three principles I want to share based on my experiences running large organisations who deploy traditional performance management systems and scaling fast-moving agile teams across multiple countries.

First, performance feedback is so crucial to company performance and employee growth. It needs to be done much more frequently. At least, every 30 days, if not more frequent. In an agile culture, we share what’s working well, what’s not working well and what we should do differently every sprint cycle – which can be as short as weekly. Ideally, feedback should be given on-the-spot. I share about using one-word feedback: ‘victim-player-knower-learner’ in Chapter 6 of 30 Days and 30 Years, to shape mindsets and reinforce culture each day. I also share how social recognition tools can be an effective way to get real-time peer feedback whenever we recognize our team members for living up to our values.

Yet, in many organisations, this just does not happen. Even if a company still practices annual performance appraisals, informal feedback can and should happen more frequently. For employees, if you approach this year-end process worried and anxious about how your boss will evaluate you, then you should take responsibility for your own career development. Seek feedback regularly, once or twice a week. Ask what’s going well and what you can be doing differently to support your boss achieve your team’s goals. Keep notes. When the formal appraisal sessions arrive, there should not be any surprises. If there is, reflect and see if you could have sought more feedback earlier on.

 Second, the biggest philosophical change should be de-coupling performance feedback from rewards. The moment there are differentiated rewards in terms of different annual bonus amounts and different annual increments, the conversations will inevitably be focused on the rating given and whether it is fair. Both supervisor and team member become defensive and the tone can become adversarial. We humans by nature, are socially motivated. We tend to compare among our colleagues and with employees in other companies.

I believe that if a company does well, everyone should receive the same proportional reward – the same number of bonus as measured by months of each employee’s salary. The moment differentiation is taken out of the picture, performance discussions can focus on growth and development, as they should. I do not believe that performance follows a statistical normal distribution ‘bell curve’. There are some superstar performers who contribute 10x of the average employee, and they should be recognized and there are those who are purposefully under-performing and deliberately hurting the company. Both of these groups are at a sub-5% extreme. The stars should be recognized through faster promotions and growth opportunities. The ones who undermine the team should be asked to leave. Within three sessions of monthly performance discussions, it should be clear that someone does not belong. Waiting for a whole year will hurt the morale of the rest of the team. Trying to evaluate and compensate the 90% differently has more downside and cost (in terms of time) than any expected performance gains.

Finally, performance feedback discussions should reinforce the link between the company’s long-term purpose and its values, to each employee’s career aspirations. Far too often, managers only focus on KPIs, targets and tasks. If we only see our team members as a production asset to get a job done, we miss a big opportunity to build genuine engagement. By giving space for our employees to articulate their aspirations and passion and highlighting how their job responsibilities can help them gain the experience they need.

For example, if a team member shares that their long-term aspiration is to lead an organisation or be an entrepreneur, we discuss how they will need to grow in at least five areas: written and verbal communications and presentations, familiarity with numbers and analytics that drive the business, planning and execution, relationship management, and curiosity and ideation. We pick at least one focus area for each performance cycle and find one business or team initiative that they are responsible for, that will help contribute to one of these five development areas.

Judging from the issues raised by our Naluri members in our executive coaching channel, there are still many middle managers who use annual performance appraisals to ‘control’ their employees and make them submissive. This breeds resentment and disengagement. For CEOs and leaders, how aware are we whether these hurtful practices happen in our organisations? And if the systems that we put in place give the means for office intimidation and bullying. For employees, are we focusing on specific actions we can take to shape our career, or are we just letting others decide our fate – believing na?vely that if we just put our head down and do our work, the world will fairly recognize and reward us?

For more on building a performance culture that is curious and purposeful and transforming how we communicate and manage performance, please check out 30 Days and 30 Years. For how we can improve employee performance and engagement through holistic mental and physical health digital coaching, please check out https://www.naluri.life/corporates