Are Performance Appraisals alone enough?

The article originally appeared in the Human Capital magazine. You can read the original article here.

“CISCO dumps the bell curve”

“GSK drops bell curve appraisals”

“Microsoft and Dell are ditching employee performance reviews”

“Deloitte joins Adobe and Accenture in dumping performance reviews”

After an illustrious run of over half a century, the Performance Appraisal, the dreaded annual ritual, is finally nearing its demise. The writing has been on the wall for a few years now. Stacking employees against each other and firing the bottom percentiles is no longer acceptable.

Why? Because the process has become so bureaucratic that it exists as an end in itself rather than actually shaping performance. Everyone is so focused on the process that the outcomes become insignificant. Employees hate it. Managers hate it. HR departments themselves hate it.

Where did it all go wrong?

Performance appraisals were adopted with a clear cut intent - keeping employees accountable, rewarding those that excel, and tracking performance over time. While in principle these are enormous benefits to be gained, it is the structure and execution of most appraisal systems that have failed employees across the board.

 Subjectivity

Being heavily dependent on opinions of one person, the process is inherently subjective. Reviews are often riddled with personal biases – conscious or unconscious. Using rating scales only creates an illusion of objectivity. Ask any Manager about how he or she decides ratings and the answer is likely to be ambiguous.

Design

The idea behind performance appraisals was to initiate 1-on-1 discussions between managers and employees, to openly discuss how they did and how they can perform better. Instead, managers are handed a standardized format of what they need to ask and how to assess each employee. The problem is that a standardized process assumes that every employee is the same. It leaves no scope for idiosyncrasies that make us unique. 

Lack of Training in Response Management

Managers are not supported enough on how to handle emotional responses. When performance appraisals go wrong, the team atmosphere can get negatively affected. Managers do not know how to follow up with the employees without causing further acrimony.

Frequency

A year is just too long a wait to give feedback. Today’s employees need instant feedback to know whether they are moving in the right direction or not.

 Stress & Anxiety

Because they happen once or twice a year, formal appraisals create an atmosphere of high anxiety and stress. Employees enter the meeting clueless - without any idea of how they have performed. They have not received feedback from their managers throughout the year and have not had any chance to improve. This makes them nervous and very defensive, especially if appraisal outcomes are linked to compensation revisions.

Humiliation

Employees perceive performance appraisals as a punishment - an excuse to criticize them. And to be honest the appraisal discussions can turn personal very fast. Managers often go on a tangent and start to evaluate the employees’ characteristics and behaviors, instead of their work performance. It is often hard to distinguish whether you are being assessed for the final results you deliver or how much your manager likes you.

Lack of Action

Managers unfortunately forget that appraisals are just one part of the larger performance management picture. If an organization only evaluates performance and doesn’t follow up with remedial action, the system is set to fail. A good performance management system is designed around actions – deciding what one needs to do to meet expectations and then doing it.

How do we fix it?

Having said all that we have, we cannot wish away the need for feedback. Feedback is the backbone of an improvement focused culture. Not only does it tell people what they are doing wrong, it also informs them of what they are doing right. As such, organizations will always need some kind of feedback mechanism.

All the companies that have famously dumped the bell curve are now experimenting with alternative feedback systems. Can’t say which is the best system - what works well for one organization may totally backfire elsewhere. But there are a few themes that are common to new feedback systems.

A 360 Degree Approach

Imagine a circle, with an individual employee standing in the center. Feedback is provided by the employee him/herself, subordinates, peers, supervisors and occasionally external sources like customers or vendors. A professional 360 Degree appraisal partner like Psyft will deliver a rich report for each employee, with multiple perspectives and from multiple sources, which creates a more balanced and objective view of an individual. This is in sharp contrast to the traditional, “manager-driven” appraisal where the entire report is in the hands of a single person. The 360-degree approach makes the appraisal process much more inclusive, putting the employee’s self-appraisal at the center.

Redesign

The bell curve and the rating scale on which it is based are being increasingly abandoned. In it’s place several new techniques are being tested like continuous feedback. For example, Adobe’s “Check-In” program where managers and employees discuss expectations and career development, with two-way feedback. There are no written reviews and the focus is on candid feedback. This approach is time-saving and does not make giving feedback a “chore”. Today, Adobe says that the change saves the company 100,000 manager hours a year.

Another appraisal methodology gaining ground is the Assessment Centre, where employees are appraised in a group/social setting by an expert team of independent observers rather than the relevant superior. Using simulation exercises supervised by professionals like Psyft, it gives an insight into both professional capability of employees as well as their personality characteristics like openness, introversion/extroversion, stress tolerance, etc. The entire exercise is completed in a day or two and personalized reports are delivered in about 10 days. So, this is again a very efficient system from a time and cost perspective. Some companies have used Assessment Centres to good effect and enhanced its utility by combining psychometric assessments like MBTI and Psyft Personality Assessment. Such Assessment Centres have successfully aided companies’ people development decisions like promotions, succession planning etc. 

Separate Pay Discussions from Performance Reviews

When performance discussions are held under the cloud of financial expectation, even constructive feedback may backfire. So it is good practice to separate the two discussions. Google has been a trendsetter here, where feedback reviews and pay discussions take place about a month apart.

Retraining

New feedback systems will require both managers and employees to be retrained. Employees will need to be trained to actively participate in the process rather than just be passive spectators. And managers would have to be trained to become more like coaches, rather than simply being judges who give an appraisal.

Of course such restructuring cannot happen overnight. H.R. departments have to completely reorient themselves around the new processes and systems. From running the process once a year they would now need to support people all the time. This will require a lot of careful planning and resource management.

Whether a company chooses to move in this direction organically or they choose to work with professional service providers like Aon or Psyft who can bring them to speed more quickly – one thing is certain – quick, crisp and actionable feedback is the future.

The article originally appeared in the Human Capital magazine. You can read the original article here.