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.
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.
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.
Pay for performance is a bad investment [the broken link was removed] 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.
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.
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.
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):
Hire good people – one of the most critical decisions we all make.
Train and educate them – even if they come from the best universities and are at the top of their class.
Coach them, constantly, don’t wait for an annual appraisal to correct an issue or behavior.
It is the system that must be improved to ensure people work to their potential.
Recognize your top performers, but money isn’t the best method of recognition, in fact, it can be counterproductive.
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. Continue reading →
Appraisals are a waste of Time [the broken link was removed]
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.
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.
Employee performance: Continuous, constructive feedback yields results [the broken link was removed]:
Be specific. If you simply say “Good job, Frank,” Frank won’t know exactly what he did to get that atta boy. Therefore, he can’t consciously work to repeat that behavior. Instead, say something like “Frank, that new procedure you developed for handling service calls has really improved customer satisfaction. Thanks for coming up with it.”
Include coaching. Annual reviews often are used as the only performance communication tool. They give the associate a “grade,” but do they have a well-crafted development section? Do they have a plan for how you are going to partner with them to help them grow? If they do, how often do you visit the plan throughout the year to make sure it’s on track?
Exactly right. As I have discussed I don’t believe in the annual performance rating (Performance Appraisals – Is Good Execution the Solution? – Performance Appraisal Problems…) so I would just skip the grade. The correct strategy, communicate and coach continually. Have defined process that are clear to everyone. Have clear expectations for what people are suppose to do and have methods to make problems visible so they can be addressed.
At your hotels, there are opportunities every day to provide constructive feedback for your associates’ success in the different aspects of their jobs. Whether it is technical (i.e. can’t get the bank to balance / the chicken cordon bleu isn’t to spec) or behavioral (i.e. time management / consistent follow-through), knowing these things along the way allows them to grow and support the big picture. Communication also builds trust between you and your team.
More good points. This stuff is not exactly rocket science but so few organizations do this well – even as obvious as it is.
Appraising the Performance Of Performance Appraisals [the link that IEEE broke was removed] by Harry Goldstein:
The traditional annual review covers a lot of ground: coaching and guidance for the employee, feedback and communication, compensation, staffing decisions and professional development, legal documentation, and ultimately, improvement for both the employee and the organization.
According to Jenkins and Coens, all of the above can be done better and far less painfully by untangling these functions and designing a process for each. First, they argue, companies should decouple compensation decisions from feedback about how the employee is doing. The point is that outside, or extrinsic, motivators such as money do not really work for the vast majority of employees.
One company that found that to be true is Brighton, Mich.-based Peaker Services, which rebuilds locomotive diesel engines and does application engineering work for control systems. In the past, Peaker relied on merit raises linked to annual evaluations, according to president Ian Bradbury.
Performance review proponents say the way it is done matters most[the broken link was removed] (based on reaction to: Performance appraisals get low marks[the broken link was removed]):
Deming, it seems, has many fans. His view of performance reviews? He included them in his catalog of the “seven deadly diseases” afflicting U.S. management in the late 20th Century. Byrne referred to Deming when he wrote: “The ‘report card’ type of yearly review [does] more harm than good. Review the person and their work all through the year and skip the sit-down review. Everybody ‘needs improvement,’ so [provide feedback] daily.”