YES! We should ditch performance appraisals!


Have you heard the old story about the girl and great-grandma’s fish dish?

It goes like this:

There once was a young girl loved to help her mom in the kitchen. One day, the mom was busy preparing the traditional family baked fish dish. She lovingly showed her daughter the deliberate and specific process she should follow to prepare the delicious fish that has been in the family for generations. “One of the most important steps,” explained the mom, “is that we must always cut off the head and the tail of the fish before putting it in the baking pan.”

“Why?” asked the curious daughter.

“That’s the way your grandma, my mother, always did it. So we follow in the tradition to ensure the fish is delicious and properly prepared,” answered the mom with conviction and pride.

The next time the girl visited her grandmother, she asked her: “Grandma, how come we always cut off the head and the tail of the fish before baking it when we make the famous family fish dish?”

The grandma shrugged and answered, “Well, that’s the way your great-grandma, my mother, always did it. I want my fish to be as delicious as hers, so I have always followed her example faithfully and prepared it the same way.”

Lucky to still have her great-grandma around, the little girl asked the same inquisitive question about the fish dish the next time she visited her.

“Well, that’s easy!” said great-granny. “My baking pan was always too small for the fish I used, so I had no choice but to cut off the head and the tail so that the fish will fit in the pan. Otherwise, I’d surely have kept them in tact!”

What else are we doing because “we’ve always done it that way” but when it no longer makes any sense and we aren’t even sure why we did it that way in the first place?

I’d suggest that our performance appraisal process is one of those things. Everyone hates it, it doesn’t add value (in fact, it often causes harm), and we just keep subjecting ourselves to them because… well, that’s how we’ve always done it.

Let’s stop that, shall we?

There’s a tide of supporting evidence rising for why we should really ditch performance appraisals as we know them. Over the past year, I’ve been lucky to work with two different large clients to help them do just that. Here’s what I’ve learned so far from the research, preparation, and roll-outs of these huge cultural changes:

How did we get here?

When you research the origin of the performance appraisal, you’ll see differing accounts about how far back it dates. Most trace it back to the 1930s and a Harvard Business School professor named Elton Mayo who found that the happiness and productivity of workers in a Western Electric factory were directly related to the social structure of the workplace.

With this insight about the nature of work, it became important to consider more than the individual’s specific qualifications and the focus was expanded to the work environment and how their bosses managed them. Back then, formal meetings were introduced for this kind of assessment.

Then the U.S. government institutionalized these formal performance management meetings in the 1950s with the Performance Rating Act, which mandated annual reviews of federal employees. Then we added more laws to tie bonuses and salaries to these appraisals. You probably know the story from there…

And how is that working for us?

In a phrase: not so well.

Quality guru W. Edwards Deming wrote about this broken process back in his 1986 classic book, Out of the Crisis: “It nourishes short-term performance, annihilates long-term planning, builds fear, demolishes teamwork, [and] nourishes rivalry and politics.”

Eighty six percent of companies say that performance management isn’t working well. A recent Society for Human Resource Management (SHRM) survey revealed that only two percent of human resources professionals would give their organization an A in performance management.

The data show that there’s actually “no measurable impact on performance linked to the number of ratings people have, or from altering the wording for these ratings.”

In fact, not only do they not have a positive impact on performance, ratings can be perceived as threatening and counterproductive. They can lead to employee fear and defensiveness, decreased performance, and less openness to developmental feedback.

One of my clients this year took a close look at their own data and found that approximately 80 percent of staff in the past two performance cycles received a “Meets Expectations” rating. How is this useful? Is there any way to differentiate among different performance levels in a meaningful way with that kind of uniformity so rampant? What’s more, the “Exceeds Expectations” rating seemed to be commonly reserved for those being promoted – which may have actually served to demotivate strong performers at their current level who are told they are merely “Meets Expectations” despite excellent work. The stories abound about the demotivating effects of performance ratings.

And everybody – I mean, EVERYBODY – hates them. Employees AND managers hates them. (Want to see how much you hate them? Take this test called How Much Do You Hate Performance Reviews?.)

Our insistence to keep going with this bad-news scenario hurts business, according to UCLA professor Sam Culbert. In his book, Get Rid of the Performance Review!, Culbert describes how annual reviews make everybody less productive – both givers and receivers.

For example, Adobe studied its performance management process and determined that “annual reviews required 80,000 hours of time from the 2000 managers at Adobe each year, the equivalent of 40 full-time employees. After all that effort, internal surveys revealed that employees felt less inspired and motivated afterwards—and turnover increased.” [From the book Scaling Up Excellence]

Why do we do this to ourselves?

Well, what’s the alternative?

So glad you asked!

Discuss performance in real time –all the time – for performance improvement purposes! [Tweet it!]

Some companies that are no longer using ratings for performance include Expedia, Medtronics, Zappos, Adobe, Kelly Services, Booz Allen Hamilton, PriceWaterhouse Coopers, and Juniper Networks. Companies that have ditched performance assessments completely include Apple, Atlassian Inc., The Motley Fool, Intel, Texas Roadhouse and PDRI. While still only about three percent of companies are doing anything radical about how they manage performance, that list is growing. I suggest you join the leaders of the pack and ditch this sick practice once and for all!

5 best practices for better a performance management approach

Here are some best practices for ways to ‘do’ performance that don’t entail annual performance appraisals or meaningless, damaging ratings:

  • Make performance feedback an ongoing and informal practice. Expedia “ditched ratings and reinvented its performance management program with a focus on ongoing feedback.” The findings of my team when we did our bench-marking research for a client earlier this year showed that this was also the case with several other companies leading this new charge to revamp performance management.

  • Create safety for open communication and feedback. It’s not enough to just talk about performance on a regular basis. It’s important to ensure that there is a sufficient sense of safety that helps employees know that performance feedback is delivered with the intent to support their development, not thwart their success.

  • Align the culture and environment to support the new behaviors. All the companies we studied knew they had to ensure that their culture supports ongoing, informal feedback and coaching practices. That means leaders at all levels had to model the right behavior, be supported with ongoing tools and messages, and that the organization rewarded the right (new) behavior.

  • Get senior leadership to show support. My team also found that these pioneering companies engaged senior leadership in setting the direction and tone for a culture of ongoing feedback – this really helped create an environment for successful adoption of this tremendous culture change.

  • Support managers by providing them with training and performance support tools. The companies that we studied provided various types of training and performance support mechanisms to managers in order to help them give productive feedback that enhances employee performance. They also helped employees learn how to give and receive constructive as well as positive feedback effectively.

Neuroscience expert David Rock said, “tweaking the system is easier than the hard work of training managers to have effective conversations.” It’s true. We have to ensure we aren't taking the easy way out of this mess and merely ‘tweaking’ a broken system.

We have to do the hard work and get it right. Or closer to right. But let’s face it: what we have now is so very wrong – so it is really worth it to invest ourselves in making this change. Don’t you agree?

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