The Poor Performance of "Performance Appraisals"!!

As I am now unemployed, I try in the morning to help my mother with some housework. She relentlessly never stops telling me how to do things the perfect way– in other words, her way. Although I don’t always agree with her, and we fight 100% of the time I try to help, I think she makes a true one-minute manager; she gives guidance and feedback instantly. My performance has improved significantly in the past three months because of her showing the way and being a leader, not a boss (yet a leader with a bossy attitude!).

This made me think about performance appraisals. Those meetings that I used to call them “judging sessions” or “Time machines trip of shame”. Although most of the time I had a good rating, I hated the fact that someone watched me do something wrong and waited a year to tell me that. I always felt that I was robbed an opportunity to grow and evolve way earlier which could have changed the course of my life.

The format of the performance evaluation that I am speaking about here is a process that is:

• Done TO employee, not WITH employees
• Occurred once a year: managing by looking in the rearview mirror without any future orientation

I am someone who is Quality enthusiast, I enjoy streamlining processes especially the part of removing steps that do not have added-value. Recently, I got convinced that the above-described performance management practice is one of those steps.

I did some researches to support my view and guess what, I had a very powerful ally; the godfather of Quality Dr. Edward Deming who has warned of performance management from a long time ago and listed it as one of the seven deadly diseases of management when he said the following:

“Evaluation of performance, merit rating, or annual review… The idea of a merit rating is alluring. the sound of the words captivates the imagination: pay for what you get; get what you pay for; motivate people to do their best, for their own good. The effect is exactly the opposite of what the words promise.” (Out of The Crisis)

Dr. Deming understood that the practice of motivating people to do their best for their own benefit will, in most cases, deem disastrous on the system and the organization itself as employees and organizations’ goals and good are mostly not aligned.

Dr. Deming was not alone as he was supported by the employee engagement expert Mr. Peter Scholtes, who described performance appraisal as “a practice that was demoralizing and wrong”, and further said:

“Improvement efforts should focus on systems, processes, and methods, not on individual workers. Those efforts that focus on improving the attentiveness, carefulness, speed, etc., of individual workers — without changing the systems, processes, and methods — constitute a low-yield strategy with negligible short-term results”

I don’t know about you, but that sounds intuitive to me because you can take an excellent employee and put him in a system where he is given poor tools and you get poor performance regardless of how good the employee could be. The same for talented employees who work in companies that have poor leadership, are disorganized and so on.

The success of performance management concept needs all the below statement to be true at the same time: (Logic Case)

1. Organizations and individual objectives are SMART and set based on valid data.
2. Employees and managers understand the objectives, believe in them and strive to achieve them.
3. The relationship between managers and employees is healthy and based on mutual trust.
4. Employees are in complete control of their performance regardless of the system's effectiveness, tools, colleagues or workplace environment.
5. Employees are “professional” (machines) enough to be able to disconnect from their family problems, economic hardships, security danger like war, the anxiety of spread diseases and so on.
6. The same numerical rating can be applied to all kinds of work especially knowledge work
7. Managers are completely rational which means that all of their decisions are taken based on objective criteria and they are not affected by mood, prejudice, favoritism or hypocrisy.
8. Managers are psychology experts that they are able to pinpoint the strength and weaknesses of any employees.
9. Employees are completely rational and objective which makes them able to accept any remarks about their work or behavior without any hard feelings.
10. Anything less than the top rank will encourage employees to perform better- if they can.

Here is a list of everything wrong with performance management regarding the impact on the organization as a body: (Organization’s behavior case)

1. It undermines teamwork: It causes employees and departments to compete against each other rather than together against competitors.
2. It shifts employees focus from the customer toward themselves and their line managers It increases fear in the workplace
3. Motivating employees to perform better for their own good encourages selfishness and thus employees will prioritize personal gain over collective gain. This may lead employees to fraud, corruption or at least abusing the system for personal gain.
4. It encourages a superficial problem-solving approach through which managers focus on employees rather than the system.
5. It fosters setting safe goals and a ceiling of mediocrity in the organization.
6. It creates an environment where favoritism, prejudice, and hypocrisy can flourish.
7. It is a time-consuming and costly process: think of the time needed for:

• HR to follow up with managers and remind them about performance appraisals
• Meetings between managers and employees
• Managers and employees filling the needed templates
• HR receiving this data and compiling reports

How it affects employees and why they hate it: (Employee’s Psychology case)

1. Labeling a human being with a number is just inhumane. For me, even if the number was the complete mark I would still feel awkward.
2. Objectification: Employees feel like tools; worth as much as it produces.
3. Managers doing ineffective performance appraisals – whether intentionally or because of lacking experience – lose their creditability with employees and the relationship gets affected.
4. When it is unfair, it backfires and creates cynics, losers and wasted human resources.

If you are still in doubt, here is a science-based “KO finisher” for this old fashioned and inhumane practice:

Mercer (2013) found in their comprehensive survey of 1,050 performance management leader in 53 countries that:

1. 95% of organizations set individual goals and conduct a formal year-end review discussion.
2. 89% of companies have a “pay for performance” philosophy for individual workers.
3. 3% of those surveyed thought the performance management systems in their companies delivered “exceptional value”.
4. Workers rate only 14% of managers as “highly skilled” in holding performance evaluation discussions with employees and only 8% as highly skilled to ensure fair performance appraisals.

As clever investors, we need to stop this costly practice that has no added-value and often hindering the organization's success. We need to find a more humane way to get the most out of employees, this new way will definitely have Empathy at its core as the performance management will look something like this:

1. The objectives should be set by the teams in alignment with the department and organization objectives with each employee has individualized objectives. (Fulfilling the engagement of people ISO principle)
2. Managers can ask for psycho-social support experts.
3. The review should start with self-assessment and then the manager can lead the two-way conversation focusing on the future.
4. The review is an opportunity for employees to speak about difficulties related to the system and how can managers improve the system.
5. Numerical ratings should be omitted.
6. If the team has trust in each other, we can go for a 360-degree evaluation after their consensus.

Note:

I just want to mention that more than 90% of the information in this article are derived from the below resources:

https://becomeabetterinvestor.net/why-we-stopped-performance-appraisals-at-coffeeworks/

https://performance-appraisals.org/Bacalsappraisalarticles/articles/hiddendamage.htm

https://blog.deming.org/2012/10/dr-deming-called-for-the-elimination-of-the-annual-performance-appraisal/

https://www.strategy-business.com/article/00275?gko=c442b

https://www.tlnt.com/the-top-50-problems-with-performance-appraisals/

https://www.dhirubhai.net/pulse/20140407122632-43127411-10-ways-to-modernize-performance-reviews-performance-management/

Video: https://www.youtube.com/watch?v=XrnfSeMXSO0&list=WL&index=7&t=0s