As we come to the end of the second quarter in the calendar, it’s time for many companies to start their mid-year reviews as part of their annual appraisal process. I actually intended to write this article back in February when my company gave out annual reviews, but life got in the way and I forgot about it until I was reminded that my self-appraisal was due in a couple weeks.
Performance appraisals, or more politically-correct, performance management programs typically consist of managers evaluating their employees each year and providing feedback about what they’re doing well and where they should strive to improve, and also for determining merit-based bonuses and/or pay raises. Appraisals are seldom, if ever, used as intended, they’re almost never effective, and they are strongly disliked by management and the employees. Nobody likes giving them, nobody likes getting them.
A number of companies have tried to improve them by adding mid-year reviews or even monthly ones (my company calls them MBO, or Management by Objective, sessions) as if making a bad process more frequent somehow improves the effect or the experience. As with annual reviews, the concept is that constructive feedback (which is almost always perceived as “negative feedback”) is going to be welcomed by employees who will then change behaviors and become stronger performers for the organization.
People IQ, in a 2005 national survey, found that 87 percent of employees and managers felt performance reviews were neither useful nor effective.
What’s it take for companies to realize the appraisal process is a bad idea that actually impacts their employees’ morale and hinders productivity?
The Confusing Purpose of Evaluations
The primary goal of the appraisal process is often confusing for employees. It’s intended to provide an objective and structured way for managers to formally grade employees’ past efforts and provide guidance for how they should to strive for maximum score in next review period. In cases where the employee workforce no longer views them as being objective, they can become instruments solely for justifying varying bonuses between workgroups or even individual team members, making the process even more frustrating for any employees who perceives that their hard work has been undervalued.
Many companies go through an additional step (sometimes called stacking, calibration or forced ranking) to artificially inflate or deflate a percentage of the upper and lower scores, which exacerbates the negative experience for employees in the middle or lower tiers and effectively reverses the cause and effect, making the review score dependent on a available bonus funds.
I left my last appraisal feeling as though I deserved a 4/5 in areas where I went above and beyond what was expected of me and what my skill set was intended to provide to the company. In some of those, I was given a three, and the explanation that “we don’t give fives anymore.” If there are fives in the available scores you can rate me, and the definitions of scores 1-4 haven’t been adjusted, then there are still fives. Whether you give them to employees is a different thing altogether. The result was that I didn’t clearly understand how my work was evaluated, and I had no idea how to achieve a higher score in the next review period. I certainly didn’t feel there was an obvious incentive to go above and beyond as I walked out of the room that day.
Assume for a moment that I’m not the only employee confused by the process, and ask yourself how this process helps a company meet its corporate goals by evaluating the performance of its employees?
Self Appraisals
In many cases, employees are asked to go through the process of evaluating themselves. Aside from the obvious issue that this takes the employee away from doing the very tasks they are being graded on their ability to complete, few employees are likely to highlight weaknesses for their manager, which means the self-appraisal is not a useful tool for employees to seek to improve themselves. More often than not, the employee will use the self-appraisal to document and justify the ratings he or she feels is deserved for work that has been performed. Again, if the process is not viewed as being objective and legitimate, highlighting your shortcomings during the review period is akin to talking to the police without an attorney. Only a stupid employee is likely to inventory and describe weaknesses for a manager that is about to evaluate them for the purposes of financial reward.
Manager’s Evaluation
Nobody likes to be told what they’re doing wrong. I pride myself on the fact that I appreciate both positive and critical feedback, but there are a couple of assumptions in that statement. First, that the feedback is balanced. I respond to being told when I do something wrong, but I also respond to being told when I do things right. This is a fairly normal human response. Plenty of evidence supports that “constructive criticism” is almost always better described and most frequently interpreted as “negative criticism.” Studies have shown that employees are unlikely to respond to it and will typically have a defensive reaction instead. Ultra-high performers (also called hyper-performers in some research) are actually incentivized to leave by it and their willingness to collaborate may be limited in the interim.
It’s not brain surgery. People need a balance of objective feedback or they lose motivation to strive. While many employees might be satisfied with a 4/5 rating, a hyper-performer could reasonably expect a five, even if a more objective score is a four. Give him or her a three and you might as well start looking for a replacement with the same set of skills, which is not always an easy task.
In an article published in The Psychological Bulletin, psychologists A. Kluger and A. Denisi analyzed 607 studies of performance evaluations and concluded that at least 30 percent of the performance reviews ended up in decreased employee performance. There was no evidence they actually improve employee performance.
The Bell Curve
The hypothetical bell curve (or normal distribution) in employee performance is a myth. The statistical model of normal distribution assumes there is the same number of people above and below average, and that there will be a very small number of people two standard deviations above and below the average (mean), which simply isn’t true. Assuming it is true Inflates performance measurements for highest performers, while creating an artificial “loser” group even in a team full of high-performing employees.
Most importantly, comparing employees to an “average” isn’t meaningful at all, because the small number of people who are “hyper-performers” account for a very high percentage of the overall value to the organization. Research conducted in 2011 and 2012 by Ernest O’Boyle Jr. and Herman Aguinis (633,263 researchers, entertainers, politicians, and athletes in a total of 198 samples) found that performance in 94 percent of these groups did not follow a normal distribution. Rather these groups fall into what is called a “Power Law” distribution.
For a really great read about this specific topic, see The Myth of the Bell Curve: Look for the Hyper-Performers by Josh Bersin.
Even clinical psychologist and world-renowned management consultant Aubrey Daniels has this to say: Time spent on “the Performance Management System” could be better spent on helping employees make products or services better, faster and cheaper or creating new products and services.
So again, I ask: What’s it take for companies to realize the appraisal process is a bad idea that actually impacts their employees’ morale and hinders productivity?
