View all Articles

In search of the perfect performance appraisal

Part one of a two-part series.

WANTED: An easy-to-use template for conducting effective annual performance appraisals, adaptable for all industries and for employees in all departments, from middle managers to account executives to receptionists. Must be designed to minimize awkwardness, save time and result in improved employee performance. Will pay top dollar!
Does this sound like something your organization is striving for?
Unfortunately for those seeking a quick fix to the oft-dreaded performance review process, the truth is this: Meaningful discussions and feedback between supervisors and employees have nothing to do with the design of a form. Organizations that base their performance feedback system on a proscribed piece of paper invariably find that what might have been a natural, helpful discussion instead becomes an awkward, tense inspection.
Not that people aren’t trying. Of the 10,000 business books published worldwide over the past three years — touting innovative management tools that promise the user incredible success — a significant portion offer ideas on how to perfect the traditional performance appraisal.
The need is indisputable. Research on performance improvement indicates that performance feedback systems succeed only one-third of the time. In another third of cases, they have no effect. Alarmingly, in the final third of cases, feedback processes actually worsen performance.
Yet 80 percent of workplaces continue to use an annual performance review. According to Tom Coens and Mary Jenkins, authors of “Abolishing Performance Appraisals,” most human resource departments redesign their appraisal process every three to five years — creating new forms, altered ratings, more bells and whistles.

Why most performance appraisals fall short

Why do traditional performance review systems often fail? Likely because of:
1. Inflated expectations. Many appraisals try to accomplish too many things. During this annual or semiannual discussion, managers are expected to justify merit increases, give feedback, document performance problems, and provide career counseling. Often one objective undermines the other, especially if money is part of the discussion.
2. Complexity and time constraints. Depending on the method used, some performance appraisals are ridiculously complex, involving bureaucratic forms and taking too much of managers’ time.
3. Timing. Many companies conduct reviews based on the employee’s anniversary date of employment or on a pre-selected date that matches an administrative timeline. While such timing may make sense on one level, consider this: Would it make sense to evaluate Santa Claus in June or a basketball player on his birthday?
4. Human nature. Few of us enjoy hearing about our shortcomings, and few managers enjoy discussing them. When you consider that 80 percent of employees believe they’re in the top quarter of all workers, it’s easy to see why a once- or twice-a-year evaluation is doomed to be demoralizing.

Legal considerations

Before looking at alternatives, it’s important to mention the legal reasons why most companies document performance feedback. While no law requires it, most employers know that, should they face a wrongful termination suit or other employee legal action, the employee’s attorney would immediately seek a record of performance appraisals.
Employers who are prudent about the law will document performance problems, showing that the employee was informed that he was falling short, was told of the consequences if his performance didn’t improve, and was given tools and guidance for meeting improvement goals.

Building a better model

So what’s the solution to flawed performance appraisals? First, management must decide precisely what it wants to achieve with performance appraisals, and design a practical system that meets those goals, keeping in mind the precious commodities of time and money.
An effective system involves many factors, but the following two are among the most important:

Frequency of appraisals. Though they remain popular, annual or semiannual reviews are hopelessly inadequate. As business leaders expect workers to be project-driven and results-oriented, it makes far more sense for managers to provide frequent feedback, with specific coaching pertinent to the project at hand. Feedback delayed for up to a year, during which time memories grow dim, is useless for the employee – and can be dangerous for the company. What organization in today’s fast-paced climate can wait a year to suggest that an employee make a course correction?

Some managers may protest that frequent interactions will take too much time. But Marcus Buckingham and Curt Coffman, authors of “First, Break All the Rules,” found that the best managers spent, on average, about one hour per person per quarter discussing performance. In between conversational meetings devoted to feedback, managers can build helpful interactions into routine meetings, and can deliver feedback through voicemail, email and short notes. The regularity of feedback, too, eases the anxiety inherent in dropping a “bomb” on an under-performing employee during an annual review.

Uncoupling raises and feedback. Again, performance appraisals that attempt to accomplish everything in one meeting are bound to disappoint. A discussion of money nearly always overshadows everything else covered in the meeting. Employees hear only “how much” and become unable to focus meaningfully on their performance. More companies, as they adopt frequent feedback and performance planning sessions, allot separate times each year to discuss merit increases.

In my next column, I will focus on additional factors that support an effective performance appraisal system, and will highlight a few of the innovative approaches adopted by forward-thinking companies.

© HR Works, Inc.

HR Works, Inc., headquartered at 200 WillowBrook Office Park in Fairport (Rochester), New York, with an office in East Syracuse, is a human resource management outsourcing and consulting firm serving clients throughout the United States. HR Works provides scalable strategic human resource management and consulting services, including: affirmative action programs; benefits administration outsourcing; HRIS self-service technology; full-time, part-time and interim on-site HR managers; HR audits; legally reviewed employee handbooks and supervisor manuals; talent management and recruiting services; and training of managers and HR professionals.