Firms have an irrational faith in the effectiveness of performance appraisals. Most firms and employees are dissatisfied with the performance appraisal process, so it remains a curiosity why this methodology continues to exist.
Peter Drucker pointed out continuously in his books that the appraisal process itself were designed by the clinical and abnormal psychologists, who were concerned with what was wrong with the patient, diagnosing their weaknesses rather than focusing on their strengths.
Yet good leaders—like good coaches—design performance processes and tasks around a person’s strengths, and ignore—or make irrelevant—their weaknesses.
An excellent article from The Wall Street Journal, “Get Rid of the Performance Review!” delivers 7 reasons why this archaic ritual must go.
The author, Dr. Samuel Culbert, professor of management at UCLA, makes a compelling and succinct case for why performance appraisals are a dysfunctional pretense.
As a compliment to the article, a must-read heretical book, Abolishing Performance Appraisals: Why They Backfire and What to Do Instead.
Tom Coens, one of the co-authors of the book, is a labor lawyer and does an excellent job in dispelling the myth that appraisals are necessary for legal protection.
The authors also point out these salient facts regarding the process:
Appraisal is not the system that drives pay, careers, and status; it is an incidental effect of those dynamic systems. Appraisal is primarily the paper-shuffling that sanctifies decisions already made.
Another problem with the process is the “annual” aspect of it; a year is far too long a time frame to evaluate and give feedback to any worker, but especially a knowledge worker.
Any organization of humans—be it a school, a nonprofit agency, a governmental unit, or a business—is going to have a bell curve of high, average, and below-average performers. It is estimated that the best computer programmers are at least 12 times as productive as the average.
Alan Eustace, a vice president at Google, says that “one top-notch engineer is worth 300 times or more than the average” (The Economist, October 7, 2006: 22).
Given human nature, not much can be done about this distribution, but what we can do is not exacerbate the problem of below-average workers by designing systems around their weaknesses at the expense of placing a ceiling over the heads of the superior performers.
Firms should strive to create a meritocratic environment that rewards risk taking and innovation, rather than rigid, stultifying union-type jobs that reward seniority, mediocrity, and complacency.
It is not uncommon, for example, for salespeople working the floor of Nordstrom to earn over $100,000 per year; as they say, “Your performance is your review.”
What to do instead
In the article, Dr. Culbert suggests conducing “previews,” which are a two sided, reciprocally accountable process, focused on the future rather than the past.
This is Peter Drucker’s concept of a manager’s letter, wherein each knowledge worker defines the objectives of his superior’s job and his own job, the lists the tasks he must do to achieve these goals, along with the resources needed, obstacles, etc.
We also suggest as a replacement to appraisals After Action Reviews and Before Action Reviews.
Business is based on performance and results, not objective rankings on stale performance appraisals.
Isn’t it time to eliminate this wasteful process in firms of the future? What do you think?