Tag Archives: Performance Appraisal

Annual Performance Reviews Are Obsolete

Sam Goodner, the CEO of Catapult Systems, wrote about his decision to eliminate the annual performance appraisal.

the most critical flaw of our old process was that the feedback itself was too infrequent and too far removed from the actual behavior to have any measurable impact on employee performance.

I decided to completely eliminate of our annual performance review process and replace it with a real-time performance feedback dashboard.”

I think this is a good move in the right direction. I personally think it is a mistake to make the measures focused on the person. There should be performance dashboards (with in-process and outcome measures) that provide insight into the state of the processes in the company. Let those working in those processes see, in real time, the situation, weaknesses, strengths… and take action as appropriate (short term quick fixes, longer term focus on areas for significant improvement…). It could be the company is doing this, the quick blog post is hardly a comprehensive look at their strategies. It does provide some interesting ideas.

I also worry about making too much of the feedback without an understanding of variation (and the “performance” results attributed to people due merely to variation) and systems thinking. I applaud the leadership to make a change and the creative attempt, I just also worry a bit about how this would work in many organizations. But that is not really what matters. What matters is how it works for their organization, and I certainly believe this could work well in the right organization.

Related: Righter Performance AppraisalWhen Performance-related Pay BackfiresThe Defect Black Marketarticles, books, posts on performance appraisal

Problems With Student Evaluations as Measures of Teacher Performance

Dr. Deming was, among other things a professor. He found the evaluation of professors by students an unimportant (and often counterproductive measure) – used in some places for awards and performance appraisal. He said for such a measure to be useful it should survey students 20 years later to see which professors made a difference to the students. Here is an interesting paper that explored some of these ideas. Does Professor Quality Matter? Evidence from Random Assignment of Students to Professors by Scott E. Carrell, University of California, Davis and National Bureau of Economic Research; and James E. West, U.S. Air Force Academy:

our results indicate that professors who excel at promoting contemporaneous student achievement, on average, harm the subsequent performance of their students in more advanced classes. Academic rank, teaching experience, and terminal degree status of professors are negatively correlated with contemporaneous value‐added but positively correlated with follow‐on course value‐added. Hence, students of less experienced instructors who do not possess a doctorate perform significantly better in the contemporaneous course but perform worse in the follow‐on related curriculum.

Student evaluations are positively correlated with contemporaneous professor value‐added and negatively correlated with follow‐on student achievement. That is, students appear to reward higher grades in the introductory course but punish professors who increase deep learning (introductory course professor value‐added in follow‐on courses). Since many U.S. colleges and universities use student evaluations as a measurement of teaching quality for academic promotion and tenure decisions, this latter finding draws into question the value and accuracy of this practice.

These findings have broad implications for how students should be assessed and teacher quality measured.

Related: Applying Lean Tools to University CoursesK-12 Educational ReformImproving Education with Deming’s IdeasLearning, Systems and ImprovementHow We Know What We Know

Get Rid of the Performance Review

How Much Do You Hate Performance Reviews? by Bob Sutton

Deming emphasized that forced rankings and other merit ratings that breed internal competition are bad management because they undermine motivation and breed contempt for management among people who, at least at first, were doing good work.

If you want to read the most compelling and complete case against the traditional performance evaluation, however,I suggest that you pre-order UCLA Professor Sam Culbert’s new book Get Rid of the Performance Review. He first made this argument in the Wall Street Journal, but the book digs into this argument in far more detail and offers solutions for managers and companies who want to replace the traditional review — or at least reduce the damage that they do. To help spread the word about the book, and to find out if as many people despise the performance review as Sam (and I) believe, he has — a bit like the ARSE — designed a ten-item test called How Much Do You Hate Performance Reviews? I just took it and scored a 36, which means I really hate them.

Related: The Trouble with Performance Reviews by Jeffrey PfefferDeming and Performance AppraisalPerformance Appraisals, Good Execution is not the Solution?

Extrinsic Incentives Kill Creativity

If you read this blog, you know I believe extrinsic motivation is a poor strategy. This TED webcast Dan Pink discusses studies showing extrinsic rewards failing. This is a great webcast, definitely worth 20 minutes of your time.

  • “you’ve got an incentive designed to sharpen thinking and accelerate creativity and it does just the opposite. It dulls thinking and blocks creativity… This has been replicated over and over and over again for nearly 40 years. These contingent motivators, if you do this then you get that, work in some circumstances but in a lot of tasks they actually either don’t work or, often, they do harm.”
  • there is a mismatch between what science knows and what business does
  • “This is a fact.”

What does Dan Pink recommend based on the research? Management should focus on providing workplaces where people have autonomy, mastery and purpose to build on intrinsic motivation.

via: Everything You Think about Pay for Performance Could Be Wrong

Related: Righter IncentivizationWhat’s the Value of a Big Bonus?Dangers of Extrinsic MotivationMotivate or Eliminate De-MotivationGreat Marissa Mayer Webcast on Google Innovation

An Introduction to Deming’s Management Ideas by Peter Scholtes (webcast)

An Introduction to Deming’s Management Teaching and Philosophy by Peter Scholtes – webcast from the Annual W. Edwards Deming Institute conference in Madison, Wisconsin, November 9th, 2008. My previous post on this speech: 6 Leadership Competencies.

Next month, the Annual Deming Institute conference will be held at Purdue on Oct 10th, 2009.

Related: Peter Scholtes’ LifeCurious Cat’s Deming on ManagementThe Leader’s HandbookPerformance without Appraisal

Dr. Deming Webcast on the 5 Deadly Diseases

The W. Edwards Deming Institute has posted Dr. Deming’s 1984 video on the 5 deadly diseases of western management.

  • Lack of constancy of purpose
  • Emphasis on short term profits – “creative” accounting, focus on quarterly profits
  • Annual Performance Appraisals – management by objective, management by fear
  • Mobility of management – [see Toyota for a great example of a company that operates on different principles – where the leadership has been with Toyota for decades]
  • Running a company on visible figures alone – many important factors are “unknown and unknowable.”

Dr. Deming added 2 diseases to reach his famous 7 deadly diseases: excessive medical care costs and excessive legal damage awards swelled by lawyers working on contingency fees.

Personally I believe all 7 of those diseases are still prevalent and causing damage. I do think some progress has been made on longer term thinking but far too many organizations still are extremely short term focused. And I would add two new deadly diseases of management: excessive executive compensation and an outdated intellectual property system.

Related: Deming CompaniesPurpose of an OrganizationContinual ImprovementCreating JobsNew Management Truths Sometimes Started as Heresies

The Trouble with Performance Reviews by Jeffrey Pfeffer

The Trouble with Performance Reviews by Jeffrey Pfeffer

Managers don’t like giving appraisals, and employees don’t like getting them. Perhaps they’re not liked because both parties suspect what the evidence has proved for decades: Traditional performance appraisals don’t work. But as my colleague and fellow Stanford professor Bob Sutton and I pointed out in our book, Hard Facts, Dangerous Half-Truths, and Total Nonsense: Profiting from Evidence-Based Management, belief and conventional wisdom often trump the facts. And when it comes to performance evaluations, companies ranging from HR consulting firms to providers of software that automate the process have a big stake in their continued use.

The most basic problem is that performance appraisals often don’t accurately assess performance. More than two decades ago research done by professor David Schoorman showed that whether or not the supervisor had hired or inherited her employees was a better predictor of evaluation results than actual job performance.

Possibly the biggest issue, however, is that performance appraisals focus managers’ attention on precisely the wrong thing: individual people. As W. Edwards Deming, the father of the quality movement, taught a long time ago, company performance often results more from variations in systems than from the individuals doing the work. One of the reasons Toyota Motor has been so successful for decades—even as leaders have come and gone and the automobile market has changed—is that the fundamentals of the Toyota management system, which emphasizes quality, continuous improvement, and standardized tasks, provide the advantage. By focusing on the presumed deficiencies or strengths of people, individual performance reviews divert attention from the important task of eliminating the systemic causes, such as inferior technology, behind poor performance.

Another good article pointing out the harm of annual performance reviews. As I have said many times managers need to do better. See chapter 9 of the Leader’s Handbook and previous posts: Don’t Use Performance Appraisals – – Deming and Performance AppraisalFind the Root Cause Instead of the Person to BlamePerformance Without Appraisal

Toyota Develops Thought-controlled Wheelchair

Toyota has developed a thought-controlled wheelchair (along with Japanese government research institute, RIKEN, and Genesis Research Institute). Honda has also developed a system that allows a person to control a robot through thoughts. Both companies continue to invest in innovation and science and engineering. The story of a bad economy and bad sales for a year or two is what you read in most newspapers. In my opinion the more important story is why Toyota and Honda will be dominant companies 20 years from now. And that story is based on their superior management and focus on long term success instead of short term quarterly results.

Yes Toyota can improve their performance, based on the last few years. Does management understand what they need to do? I think so. Does management understand that the system needs to be improved rather than the numbers on the spreadsheets of various managers have to be made better? I think so. Do I think most companies today, with bad results, understand the difference between bad numbers on spreadsheets that are used to judge various managers and a system that needs to be improved? No.

I do not believe the bad earnings for the last year for Toyota are indicative of a failed system. The results do show a weakness in the Toyota system that allowed them to perform this poorly during this credit crisis. The risk to Toyota’s future is that they become too focused on short term results, mistakenly thinking the problem to be fixed in the bad quarterly results recently. They need to focus on improving the system for the long term. And the recent experience likely shows some areas that need to be improved. But in no way do the fundamental tenants of the management system need to be changed. For many other companies today, changing fundamental aspects of their management is what is needed.

Related: Toyota as HomebuilderHonda’s Robolegs Help People WalkHonda has Never had Layoffs and has been Profitable Every YearToyota’s Partner RobotNUMMI, and GM’s Failure to Manage EffectivelyToyota iUnitInvest in New Management Methods Not a Failing Company by William Hunter, 1986
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Red Bead Experiment Webcast

Dr. Deming used the red bead experiment to present a view into management practices and his management philosophy. The experiment provides insight into all four aspects of Dr. Deming’s management system: understanding variation, understanding psychology, systems thinking and the theory of knowledge.

Red Bead Experiment by Steve Prevette

Various techniques are used to ensure a quality (no red bead) product. There are quality control inspectors, feedback to the workers, merit pay for superior performance, performance appraisals, procedure compliance, posters and quality programs. The foreman, quality control, and the workers all put forth their best efforts to produce a quality product. The experiment allows the demonstration of the effectiveness (or ineffectiveness) of the various methods.

Related: Fooled by RandomnessPerformance Measures and Statistics CoursePerformance without AppraisalExploring Deming’s Management IdeasEliminate Slogans

Get Rid of the Performance Review

Get Rid of the Performance Review! by Samuel Culbert

To make my case, I offer seven reasons why I find performance reviews ill-advised and bogus.

Inevitably reviews are political and subjective, and create schisms in boss-employee relationships. The link between pay and performance is tenuous at best. And the notion of objectivity is absurd; people who switch jobs often get much different evaluations from their new bosses.

Raises are then determined by the boss, and the boss’s boss, largely as a result of the marketplace or the budget. The performance review is simply the place where the boss comes up with a story to justify the predetermined pay.

Managers can talk until they are blue in the face about the importance of positive team play at every level of the organization, but the team play that’s most critical to ensuring that an organization runs effectively is the one-on-one relationship between a boss and each of his or her subordinates. The performance review undermines that relationship.

As I have said numerous times, I agree with Deming that management by performance appraisals doesn’t work. Most people seem to realize they are fake, cause harm, and do little if any good. But they continue to act as though it is impossible to stop activities that cause harm and provide no significant benefit.

Related: Righter Performance AppraisalPerformance without AppraisalDeming and Performance AppraisalProblems Caused by Performance Appraisal

Performance Appraisal Problems

More and more people are willing to state the frustration with the performance appraisal process. Some have been willing to take the logical step of eliminating that which causes problems but many still don’t think elimination of performance appraisals is acceptable. Performance Reviews: Many Need Improvement

According to one study by Watson Wyatt, the human resources consulting firm, only 3 in 10 employees believed that their companies’ performance review system actually improved performance. In another study by the firm, almost half of the employers surveyed thought that their managers were at best only slightly effective in helping underperforming employees to improve.

Mary Jenkins, a co-author of Abolishing Performance Appraisals: Why They Backfire and What to Do Instead advocates a system in which employees themselves seek feedback from people they work with or who have skills they seek, then review a self-designed growth plan with their supervisor. She is using this approach at Genesys Health System in Michigan, where she is vice president for organizational learning and development.

When the Wei dynasty in China rated the performance of its household members in the third century A.D., the philosopher Sin Yu noted that “an imperial rater of nine grades seldom rates men according to their merits, but always according to his likes and dislikes.”

I would go with the elimination of performance appraisals, myself (see related links below for details). I strongly suggest chapter 9 (Performance Without Appraisal) of The Leader’s Handbook, by Peter Scholtes, for those thinking about this topic.

Related: Don’t Use Performance AppraisalsContinuous, Constructive FeedbackPerformance Appraisals – Is Good Execution the Solution?Performance Without Appraisal

Individual Bonuses Are Bad Management

Gojko Adzic provides a nice post on Mary Poppendieck’s presentation at Agile 2008 on bonus, compensation and motivation: Paying programmers: are bonuses bad and what to do about it?

In software development, it is very hard to establish the effects of individual contributions and good teamwork is key to the project. Most individual compensation schemes, according to the presentation, absorb vast amounts of management time and resources and leave nobody happy, but team compensation strategies are not easy to implement. Mary presented results from HP’s experiments during the beginning of the nineties, when HP allowed 13 local organisations to experiment with team-incentive plans. All programs were discontinued by the 4th year, due to constant changes to the plans which were needed to distribute available money among the teams and a wide dissatisfaction with the plans by employees.

Use profit sharing schemes instead of bonuses to tie people to the organisation goals.
keep in mind the norm of reciprocity — if people feel that they are being treated generously, they will reciprocate it with increased discretionary effort.

As usually Mary Poppendieck provides good advice: Mary Poppendieck webcast on Leadership in Software Development. The idea that bonuses are bad management is one of the more difficult management improvement ideas for people to accept. See related posts for much more on the problems with them and what to do instead.

Related: Interview with Mary PoppendieckThe Defect Black MarketDeming on the problems with targets or goalsIncentive Programs are IneffectiveProblems with BonusesMeasuring and Managing Performance in Organizations

“Pay for Performance” is a Bad Idea

Pay for performance is a bad investment by Pete Waters

“Teacher pay set by the results” was the headline of a (Baltimore) Sun article I read the other day which suggested that “performance-based bonuses (were) cropping up across Maryland” in our state education system. Bonuses would be given to teachers and principals that were successful in raising test scores of students.

One of the many shortcomings of the program was that job duties were often not well defined, and favoritism was difficult for most supervisors to avoid.

Deming specifically considered “performance appraisals, merit ratings and annual reviews” as one category under the heading of Seven Deadly Diseases of Management. He thought that the notion of “teamwork” was destroyed by these evaluations. Deming further believed that the morale of the organization suffered because of these individual evaluations.

As Deming said (page 102 of Out of the Crisis): “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.” Understanding enough about managing organizations to know why it doesn’t work is not easy – which I think is a big reason why people go for the nice sounding, but flawed idea, I think. Read our posts on performance appraisals and the works we reference to learn.

Management Blog Posts From June 2005

Here are the blog posts from 3 years ago this month on the Curious Cat Management Improvement blog: From Mechanistic to Social Systemic ThinkingTargets Distorting the SystemDilbert and Deming.

The Dilbert site has learned to take advantage of the web and allow embedding of the strips on blogs and web pages. Good for them, but you really would have thought they would have lead this trend not delayed so long.

[Was displaying Dilbert strip from 21 January 1997 before pointy haired boss broke their service]

Update: Oh and now they seem to have broken the service. Not really a surprise if you figure the people managing Dilbert apply the pointy haired boss’ ideas to help them manage. Sigh. Scott Adams is not in any danger or running out to management lameness to ridicule.

Deming and Performance Appraisal

Guest post by Ron Kingen (originally posted to the Deming Electronic Network)

Several weeks ago someone in the DEN list ask what did Dr. Deming recommend about this issue, well I ask that very question of Dr. Deming back in the 80’s when I had the good fortune to work with him. I had expressed my concern to Dr. Deming about several of his fourteen points that I either didn’t understand completely or did not fit with my experience and/or education. Dr. Deming suggested we talk about it over dinner – during the subsequent dinner discussion Dr. Deming made several points relative to performance improvement (not appraisal):

  1. Hire good people – one of the most critical decisions we all make.
  2. Train and educate them – even if they come from the best universities and are at the top of their class.
  3. Coach them, constantly, don’t wait for an annual appraisal to correct an issue or behavior.
  4. It is the system that must be improved to ensure people work to their potential.
  5. Recognize your top performers, but money isn’t the best method of recognition, in fact, it can be counterproductive.
  6. Work with your low performers to understand their issues and difficulties; give them support and assistance. If they can’t improve and are truly performance outliers , don’t keep them, they will affect the over system.

The advice seemed valid, but I told him my company insisted we do performance appraisals. He laughed, he suggested I change the system; but Dr. Deming knew I worked for General Motors and that wouldn’t be easy. So he recommended I become a rebel and change my part of the system; which I did try. At the time I worked for one of the most progressive divisions within GM and was fortunate to work with many talented GM people and several well know and recognized experts, but I was convinced the best system change option was to leave GM.
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Performance Appraisals are Worse Than a Waste of Time

Appraisals are a waste of Time

Most British workers will certainly leave their appraisal fired up and motivated, but only to look for a new job, new research from workplace and HR body Investors in People has concluded. Nearly half of those who had an appraisal did not trust their managers to be honest during it, with a third dismissing the annual chat as a waste of time and a fifth leaving it feeling they had been unfairly treated.

The poll of nearly 3,000 workers also found a quarter who had had an appraisal suspected their managers simply saw the annual review as a “tick-box” exercise. And a fifth complained managers rarely prepared for the meeting in advance – a key bit of advice you’ll always get in appraisal training – and did not even think about it until they were actually sat down in the room.

That is just a start on the problems with annual rating of people. On page 101 of Out of the Crisis Dr. W. Edwards Deming states the following as one of the seven deadly diseases:

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.

Related: Dr. Deming on performance appraisalContinuous, Constructive FeedbackPerformance without AppraisalRighter Performance AppraisalThe Leader’s Handbook

Signs You Have a Great Job … or Not

Signs you have a great job … or not by Jeanne Sahadi

This article, while presenting an overly simplistic view in my opinion, actually provides some good reminders. The article focuses on 12 questions that seem to be the focus of a recent business book. And some of those questions provide good reminders to managers of things they should pay attention to, such as:

  • Do I know what’s expected of me at work?
  • At work, do I have the opportunity to do what I do best every day?
  • In the last 7 days, have I received recognition or praise for doing good work?
  • Is there someone at work who encourages my development?
  • Does the mission/purpose of my company make me feel my job is important?

For me, this list is more valuable than most of these types of things you see in “pop management” articles. Maybe my mood (I played some good basketball today, which always puts me a good mood) is causing me to be overly positive, but I actually think this article is worth a few minutes to read and then some reflection. Continue reading

Performance without Appraisal

re: Managing with Trust post from Coding Horror

This interesting post includes the quote:

It seems cheap to dispatch [performance reviews] without suggesting some alternative.”

Dr. Deming would mention Peter Scholtes thoughts on why performance appraisals were bad management when asked about his belief that performance appraisals should be eliminated. In the short article Performance Without Appraisal: What to do Instead of Performance Appraisals, Peter wrote:

Dr. Deming said of Performance Appraisals, “Stop doing them and things will get better.” He was correct. Many organizations, however, wonder what to do instead.

For those that do require “some alternative” Peter included some good ideas in The Leader’s Handbook(see chapter 9 “Performance without Appraisal pages 293 to 368). This chapter has excellent material for any manager. In the interest of full disclosure I not only think Peter’s ideas are great I consider him a friend and host his web site (he is retired).

Abolishing Performance Appraisals: Why They Backfire and What to Do Instead by Tom Coens, Mary Jenkins (forward by Peter Block), 2000, is another excellent source of “what to do instead.”

I think the Managing with Trust post has some good ideas but I don’t agree with everything. “In order to manage a project, you have to objectively measure what your teammates are doing.” I don’t agree with this quote. I agree you must manage a project and “that trusting your team is not a substitute for managing them.” However a manager must manage many unmeasurable factors. The stuff that can be measured is the easy part. The largest part of the job is managing the things that are unmeasurable.

Deming explores the idea of rating people on page 109 of Out of the Crisis and states “fair rating is impossible.” He goes on to explore what is commonly known as the “red bead experiment” where he shows an example of how easy it is to assign numbers to people to aid in managing. But the experiment actually shows how easy it is to be distracted by numbers instead of actually managing. It is easier to make decisions based just on the numbers you have than to take on the challenging task of managing. And to help this process along it is easier to reduce employees to simple numbers (ratings or rankings) than to deal with the complexity and interdependence that actually exists.

The Managing with Trust post also mentions Tom Demarco. I am in the midst of reading the second edition of Peopleware: Productive Projects and Teams by Tom Demarco, Timothy Lister and it is an excellent book.