Why performance based systems fail?

All companies worth their salt talk about their focus on bringing out the best talent in the industry. Yet, we see the biggest companies not succeeding in retaining the best talents. The reasons this happens is simple to see and yet companies have repeatedly failed to rectify the system due to conflicting interests of management personnel

1. Companies for managers to fit their team into a bell curve. They believe in the mathematical impossibility that average(team A) + average(team B)+....= average(whole org). This eventually leads to a widespread over or under appraisal, both of which creates an environment in which employees feel the system is unfair.
2. Irrespective of what is claimed, managers will have their biases. It is human nature to have one. HR's do not practically interfere in complaints of bias as they know that it would be an impossible task to prove. This leads to people feeling frustrated.
3. HR and senior management does not want to change bell based systems as it is a very convenient tool for them. They will always be able to get top and bottom performers from this system, whether right or wrong.
4. Managers know the system is unfair so they try to game it as well, knowing very well that the organisation would support them anyways.
5. Employees are now smart to know the system is not right so they learn to game it as well. Be it understanding their managers bias and using it to their advantage or be it their managers attitude to feed the child who cry's the most.

Eventually all this ends up creating a system that everyone knows is not fair but no body knows how to fix.

What ends up happening is even worse.

1. Employees loose respect for the organisation and their managers.
2. There is a general feeling of dissatisfaction among most employees.
3. 15-20% of the top performers gain recognition the rest of the 80-85% feel unrecognised
4. The 15-20% top performers also end up being dis-satisfied. The fact that they are marked as top performers sets expectations with them that they should be highly rewarded. Practically most of them end up with just getting marginally better hikes then the rest, which makes them frustrated.
5. People at the border line feel cheated when they miss out marginally. Further demotivating them.

Overall appraisal systems suck big time and cause more dis-satisfaction. This means it has fewer benefits than the disadvantages. Ask any employee if their appraisal systems motivates or de-motivates them and we all know the answer a majority will give.

Yet companies continue with the rudimentary appraisal systems that no longer work.

So why do we have appraisal systems ? That's food for thought!