It’s that time of the year to have your first performance appraisal. Are you excited? I bet not. Various studies show that only 14% of employees feel performance appraisals provide meaningful and relevant feedback. Even though these reviews produce minimal results, many organizations still enforce them.
As you might expect, technology companies such as Adobe, Juniper Systems, Dell, Microsoft, and IBM have led the way in abandoning traditional performance appraisals. They have been joined by several professional services firms like Accenture.
Without question, rethinking performance management should be a priority for every Organization. One school of thought has blamed performance appraisals on a lack of collaboration and innovation. Employers are also finally acknowledging that both supervisors and subordinates despise the appraisal process—a perennial problem that feels more urgent now that the labor market is picking up after COVID.
But the biggest limitation of annual reviews is this: With their heavy emphasis on financial rewards and punishments and their end-of-year structure, they hold people accountable for past behavior at the expense of improving current performance and grooming talent for the future, both of which are critical for organizations’ long-term survival. In contrast, regular conversations about performance and development change the focus to building the workforce your organization needs to be competitive both today and years to now.
The tension between the traditional and newer approaches stems from a long-running dispute about managing people: Do you “get what you get” when you hire your employees? Should you focus mainly on motivating the strong ones with money and getting rid of the weak ones? Or are employees malleable? Can you change the way they perform through effective coaching and management, and intrinsic rewards such as personal growth and a sense of progress on the job?
In the first place, how did we get here? The historical and economic context has played a large role in the evolution of performance management over the decades. When human capital was plentiful, the focus was on which people to let go, which to keep, and which to reward—and for those purposes, traditional appraisals (with their emphasis on individual accountability) worked pretty well. But when great talent was in shorter supply, as it is now, developing people became a greater concern, and organizations had to find new ways of meeting that need.
Appraisals can be traced back to the U.S. military’s “merit rating” system, created during World War I to identify poor performers for discharge or transfer. After World War II, about 60% of the workforce was using them (by the 1960s, it was closer to 90%). And then a severe shortage of managerial talent caused a shift in organizational priorities: Companies began using appraisals to develop employees into supervisors, and especially managers into executives.
In the early 2000s, organizations were using performance appraisals mainly to hold employees accountable and to allocate rewards. By some estimates, as many as one-third of Corporate had adopted a forced-ranking system. At the same time, other changes in corporate life made it harder for the appraisal process to advance the time-consuming goals of improving individual performance and developing skills for future roles.
Organizations got much flatter, which dramatically increased the number of subordinates that supervisors had to manage. The new norm was 15 to 25 direct reports (up from six before the 1960s). While overseeing more employees, supervisors were also expected to be individual contributors. So, taking days to manage the performance issues of each employee is becoming impossible. Everything comes to a standstill when appraisals are being conducted. That is already a red flag.
I am not about to tell you which approach to use because those are as many as the grains of sand on a beach in Mombasa. However, the general principle is, “Tell me how I am doing regularly (daily or at least weekly) With this principle, you don’t have to wait for six months to have a performance conversation, neither do you need excel sheet and expensive spread sheets to pause work and attend to historical data. The principle also espouses development.
If you still insist on using traditional performance appraisals, try to do it right. Before you go into the meeting, ask employees to give you a list of their proudest moments. This allows you to recognize and reward meritorious behavior that you might have missed or forgotten. And that’s important, because nothing makes high performers annoyed than not rewarding them.
The list will also tell you quite a bit about the kind of performer you have. If an employee sets his or her expectations low and expresses pride in making it to work 80% of the time, it tells you something about where this review is likely to be headed.
Looking forward to hearing your thoughts on this subject.
