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Say Goodbye to
the Book Excerpt About eighty percent of workplaces subject their employees to annual performance reviews, what human resources (HR) people call "performance appraisals." Across the land, this perennial ritual has survived for more than fifty years. Once a year, employees get uneasy and tense because they know it's time for their annual appraisal. It's supposed to be a feedback session, a time when the boss lets employees know where they stand, and a discussion about development needs. Typically ratings are issued. The results often affect pay raises and even promotion eligibility. With so much at stake, it's no wonder that people get tense. For varied reasons, the process doesn't turn out well. Again and again, we see supervisors procrastinate or just go through the motions, with little taken to heart. And the supervisors who do take it to heart mostly meet disappointment. Few employees react positively to the experience. Most employees politely go through the process with little enthusiasm, and a smaller number get defensive and embittered. Only about 5% of organizations requiring appraisal are satisfied with its results. Most HR departments re-design their appraisal process every three to five years---new forms, altered scales, and novel bells and whistles. The outcome? Déjà vu---most people are underwhelmed and the process fizzles again. If 90% of organizations consider appraisal ineffective, why does it continue? One reason is its good intentions. Appraisal is intended to facilitate employee coaching and feedback and help employees develop and grow. Ratings seemingly provide an objective way to make pay and promotion decisions. Appraisal also is supposed to ensure that the organization has the legal documentation it needs to fire poor performers. These are worthwhile goals, and most people think that tossing appraisal means giving them up---no one would get feedback, pay decisions would be unfair, and there would be no documentation to defend against employee lawsuits. Dropping appraisal, however, does not mean abandoning its goals. In fact, parting with appraisal is the first step toward getting serious about its functions, opening the door for exciting, new approaches that will really make a difference. What do organizations do instead? First, they take time to examine why appraisal really fails. Contrary to popular belief, it's not the design of the forms, inadequate training, supervisors shirking their responsibility, or prima donna employees who feel they are above criticism. The real culprit is its underlying assumptions---the beliefs and perceptions about people, work, motivation, improvement, and supervision. These underlying beliefs doom appraisal because most are false, or they send the wrong messages. When an organization practices appraisal, it's really subscribing to myths that ignore reality (see box).
Organizations moving away from appraisal succeed by building upon healthier and more realistic assumptions. They separate the purposes of appraisal, taking on only one function at a time. For example, feedback measures are totally separate from pay, development, and counseling measures for errant employees. These alternative practices also shift the primary responsibility for feedback development, and improvement to the employee. Feedback is more likely to be heard and accepted when people seek it out for themselves, choosing and holding conversations with trustworthy sources who have the needed information. Organizations eliminating appraisal create separate systems for pay increases. They no longer nickel and dime people with varying increase percentages based supposedly on merit. Pay based on merit gets in the way because nearly everyone expects high ratings---80% of employees think they are in the top quarter of all performers. Instead companies dropping appraisal rely mostly on market adjustments, maturity in the job, and cost of living. Top performers are often rewarded through promotion or reclassification if their skill has them doing higher-level work. At Michigan State University and General Motors' Powertrain Division, merit adjustments are granted only by exception---a tiny fraction of people receive special adjustments where there are compelling circumstances or someone truly stands out. This has eliminated much of the annual grumbling and fallout that follows arbitrary pay adjustments. Other organizations utilize career ladder advancements to trigger increases---employees pass tests or have their work projects reviewed by an objective panel of people excluding the supervisor who mentors the employee along. Many organizations in the retail, finance, healthcare, manufacturing, service, education industries, and the public sector have successfully parted with appraisal. Dropping appraisal has resulted in healthier work cultures where people find joy in their work without fear of arbitrary and demoralizing judgments. Better relationships among people ensue, and no longer does anyone dread that certain time of year.
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