HR Insights, HR Management

Talent Management Insanity, or Why the Performance Appraisal Must Die

Performance reviews

A definition of insanity I’ve heard many times is this: “Doing the same thing over and over, expecting a different result.”

Under that definition, it is clear to me that the practice of traditional performance appraisals is insane. And yet, we continue to do them within our organizations — by the millions.

It’s a perplexing situation. A few weeks ago, I asked a large room of recruiting professionals at a conference to raise their hands if they felt that traditional performance appraisals were a reliable and consistent way of measuring performance. Not one hand went up. Not one. Houston, we have a problem.

Why everyone hates performance reviews

If you want to get to the bottom of issues with the traditional performance appraisal, you have to do some research into both its effectiveness and its application. When you ask people about this practice, you will find out three things. In general:

  • Employees hate getting performance appraisals.
  • Managers hate preparing and giving performance appraisals.
  • HR hates administering the performance appraisal process.

The use of the word “hate” is deliberate. The feelings about performances appraisals aren’t passive in a “take it or leave it” sort of way.

It’s an emotionally-fueled hatred. The hatred flows from memories of pain, fear, and perceived injustice. And yes, even HR pros, who are generally blamed for the existence of this process, seem to despise it and resent that they are saddled with its implementation each year.

The problem with ratings

But we do a lot of things to our employees that don’t always like, so maybe that’s not enough cause to destroy the performance appraisal. If you want more reason, you need to take a step further and look at the actual performance data being captured and how it’s used in most organizations.

The best place to start is to chart out the distribution of ratings within your organization.

Most everyone dreads dealing with performance appraisals.

Most everyone dreads dealing with performance appraisals.

When we design appraisals with a 5-point rating scale, we naively assume that managers understand and will rate people appropriately using the 3 to represent “meeting expectations.” In my experience, when you look at the actual distribution of scores, you find that scores will center around 4 with some 5’s and 3’s, only a few 2’s and nearly no 1’s. In essence, the organization will slide the scale to the positive.

Part of this is probably due to the fact that a number or organizations still link these scores to compensation increases. The other part is that managers game the system to avoid conflict with their direct reports by giving higher scores that what are deserved.

Do appraisals improve performance?

When you look at the performance appraisal through this lens, it’s hard to see how this practice could be positively impacting performance within the organization. So, we add one more conclusion to the list:

  • Traditional performance appraisals provide little evidence of actually improving performance.

So, why do they still exist? When pressed, most people will say that HR requires it so that the organization has some record of performance for each employee.

Let’s first be clear that there is no legal requirement to do this. I think that most people assume that performance appraisal data should help you more effectively take action on your low performers and problem employees, but we know that it’s quite the opposite.

Because our managers inflate performance appraisal ratings to avoid conflict in the process, the performance appraisal often makes it much harder to fire and discipline the people who deserve it. So, that leads to one last conclusion:

  • Most organizations would better able to deal with problem employees if they had no performance appraisal at all.

When you add all of these conclusions together, you can’t avoid the truth that stares us in the face: the traditional performance appraisal must die. I have been advocating this position for years and have yet to find anyone who can or will make a valid argument in its defense. It’s the logical and reasonable thing to do.

2 alternatives to performance reviews

You may not be thinking that if we kill the performance appraisal, what do you do in its place? Here are some alternatives.

  1. Do nothing. If your managers know how to manage, they don’t need an artificial process of performance management. They are doing it on their own every day because it’s the only way they can successfully drive the results you demand of them. My suspicion is that if you simply eliminated the performance appraisal, you will improve organizational performance by eliminating the wasted time and emotional energy that is lost in this process.
  2. Have performance conversations. Performance management really boils down to a simple question: did you do what was expected of you? Performance management isn’t about forms and ratings. It’s about meeting expectations. So, teach managers how to have conversations with employees to clarify expectations up front and to measure performance against those standards on the back end.

Performance management doesn’t require formal documents or process. It is incredibly simple. We’ve added complexity over the years based on faulty assumptions and misplaced hope that the additional forms and processes add value. They don’t.

The main output of the traditional performance appraisal in most companies is dread, not performance. It’s time for this poorly designed and conceived practice to go the way of the dinosaur.

Performance appraisals must die. And they must die today.

Come see Jason Lautitsen speak on “When Talent isn’t Enough: Social Capital and the Future of HR at the TLNT Transform conference in Austin, TX Feb. 26-28, 2012. Click here for more information on attending this event. 

Jason Lauritsen is a talent strategist and innovator who will challenge you to think differently about talent and the workplace. A former corporate Human Resources executive, Jason is today the Director of Best Places to Work for Quantum Workplace where he leads a program that collects data from 2 million employees each year to identify, celebrate and promote some of the best workplaces in the world. He is the co-author of the book, Social Gravity and some people may know him as the tall, dancing guy with Talent Anarchy.
  • Mel Kleiman

    Third option: Let people know where they stand on a regular bases and then turn performance reviews, Into expectation setting sessions. Plan for the future you can do nothing about the past and if you wait until a performance review to talk about the past you have waited to long. 

  • Anonymous

    Jason,
    Well articulated explanation of your view on the need to bury the performance appraisal. I’ve not done the research, but I suspect the performance appraisal got its beginning in org history when companies thought they needed some way of telling employees how they were doing. It was likely born out of obligation and not as a tool to build relationships with employees.

    I echo Mel’s position that the performance conversation is ongoing and throughout the year. The company Rypple offers a great solution building on social and behavioral theories. 

    The evolution of this conversation is needed. Part of that evolution is to bury the performance appraisal as we know it today.

    I’m with you, Jason. Sorry, no rebuttal.

  • http://twitter.com/GetWorkSimple WorkSimple

    Great post, Jason. Formal performance appraisals are something we truly do not believe in at WorkSimple and I could not agree more that employees hate getting them, managers hate preparing and giving them and HR hates administering them. In order to truly improve the work of employees, management must find a more collaborative and continuous way to provide feedback far more than once of twice a year. This not only helps the employee, it has the ability to improve everyday workplace functions.

  • http://www.facebook.com/jappreet.sethi Jappreet Sethi

    Performance feedback and review is part and parcel of the life of someone in a managerial role. Poorly handled reviews lead to low morale and dissatisfaction, in turn increasing workload. There is a school of thought that believes that performance appraisals do more damage than good to the individuals being reviewed; that they are a waste of time and effort. It is certainly true that it may be better not to do a review than to go through a meaningless, mechanical ritual.

    Visit Jappreet Sethi’s HR Blog on

    http://www.humanresourcesblog.in/

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    @HR_Whiz

  • Anonymous

    You make some good points about some of the problems with performance reviews. However the main issue is how poorly executed performance management and performance reviews are in most companies. See link for further discussion. http://everydaymanager.wordpress.com/2011/06/09/dont-hate-the-performance-review/

  • http://www.hraskme.com Martin Birt

    I’m not so sure that ditching the performance appraisal will happen in many organizations. I think that what I call the “renewal interview” could be a very useful option: http://www.hraskme.com/the-renewal-interview/

  • David McCann

    Performance reviews are never any good. Period. Can managers please stay in touch with their staffs on regular basis? Why do we need this once-a-year terrorizing?

  • http://www.small-improvements.com Linda

    Great topic and well communicated. Society and work expectations have changed so much since the introduction of traditional performance appraisals, it is no wonder that there are so many emerging tools on the market with a new approach.

    So what is performance management really for? Highlighting and meeting expectations, effective collaboration and development. And what do we need to assure this is happening effortlessly? Continuous communications, accountable objectives, 360 degree feedback and a simple performance summary every few months to track the process. Keeping it simple and timely is the key.

  • Robert Schilling

    This certainly makes sense to me.  I lived with appraisals for years, and they were never worth the effort.  The bottom line is that most work in an organization is done by interdependent teams.  Holding and individual accountable for a complex group outcome doesn’t make sense to anyone.  It just gums up the work, as people try to figure out ways (like delegating up and contracting their jobs) that generally damage the organization’s innovation and effectiveness.  I especially like the conclusion – scrap what we have and start over.

  • Martin Snyder

    Nice post.  Robert Schilling make a superb point that much work and success is the result of group activity.  

    Jason, I see your heresy and raise you:  the pre-hire assessment is a disaster for the same reasons Robert identified- without group context, the results are far less reliable (if reliable at all).   

  • Karen Doty

    As an HR Director, I agree with with you wholeheartedly. The process should be scrapped and managers should be held accountable for having ongoing effective performance conversations with employees based on clearly communicated expectations. Good and bad performance needs to be recognized and addressed as it happens – not just once a year in a convoluted process where the tendency is to be positive to avoid the conflict associated with dealing with issues head-on. 
     
    Another solution is to focus on development plans, with agreement on what needs improving, measurable milestones to meet, and ongoing discussions about progress.

  • Manuel Harris

    I could not agree with you more, Jason.  For the most part, they are ineffectual in their inherent purpose (to drive performance) and totally ignored for their stated purpose (to determine compensation increases).  The stress it creates is immeassurable.  It is extremely counterproductive to department and company morale.  Not only for the employee, because no one ever believes they are a 3, even if they are one, but also for the manager who has to present the evaluation.  No amount of spin can make them believe this is a ‘good’ rating regardless of how effective you are as a manager.  It is just part of the annual sacrifice that has to be made to the business gods, I suppose.

  • Klaus Jarstad

    Performance management can be – if well executed – an important source for talent management in large organisation, but if it is reduced to one single rating on performance, I agree with the above. Systems can support a good process and help managers to keep track of the process and if integrated be an important source of HR information. However, also here the rule is “garbage in, garbage out”. I can only support the other comments on that fact that at the end, it is the line manager who is responsible for the quality and communication of performance management. HR should on the other hand consider thoroughly what information from performance management can become relevant. With good business reasons you will be able to convince both managers and employees that this is an important process for both them individually and the organisation.I can use myself as an example. Without the existing performance management process and system at one of my prior employers I would not have been asked to take over a position I have never thought of but was very glad to take over when asked by the HR department. Here performance management had given the relevant input to succession management.
    So, organisations have the right and actually the need for a properly in HR work integrated performance management, but both process and supporting systems must be set up properly and not become a “hated” perpetuum mobile.

  • Meagan4 Schmidt

    I completely agree as long as managers are having regular 1:1′s, and if necessary, give them a template with good questions to help them coach their employees to success, which results in both of them succeeding…