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  • Mark Shaw

The Elephant in the Room - Performance Appraisals Don’t Add Value

Let’s face it.  Performance Appraisals are the elephant in the room that no one wants to talk about.

Something is fundamentally wrong when you consider that:

  • 95% of line managers say they add very little or no value at all

  • 90% of HR Practitioners are critical of the process they make managers and employees use and 

  • Up to 96% of employees find them demotivating 

Worse still, anecdotal evidence suggests the cost for the above time, effort and energy is about 4% of your organisation’s current total salary budget.  It’s scary we spend so much for such poor outcomes.

I’d suggest these poor outcomes occur because we’ve designed our current approach: 

  • For the wrong end-users

  • To try and demonstrate attempts to manage poor performance if a claim for unfair dismissal occurs.

Consider the following real example:

  • A company uses a 10 page form titled “Performance Development and Review”.  It  contains:

  • Instructions

  • 7 competencies that are to be discussed using a standardised 6 point rating system from Unsatisfactory to Outstanding

  • A section to record the employee’s development plan

  • A section to record the employee’s Key Performance Indicators for the next period.  And finally

  • A section for the employee and line manager to sign as confirmation that the review is “a fair and accurate record of my performance to date”.

  • The form opens with the statement “This Performance and Development Review process provides an opportunity for two-way communications between yourself and your line manager.”

To me, this suggests the system is designed for the employee yet Ken Miller in his book We don’t make Widgets argues “Evaluations are moldy because they concentrate on the employee. As managers, many of us have spent long hours filling out these report cards, fully aware that our good employees would come in and be rock stars and our bad employees are going to come in and be marginally adequate no matter how we scored either group.”

I agree with Ken.  For too long we believed the system concentrated on the employee/manager conversation when in fact the process is designed to generate outcome (signed form) for use by others.  For example, the competency ratings, training and development plans, and KPI’s are used by HR or Senior Management to develop training plans and consider remuneration issues.

What can we do to turn the statistics around and create a better system for everyone?

For almost 20 years I have replaced ‘performance appraisal’ systems similar to the example above with one based on the following design principles:

  • Recognise that the employee/manager communication process is to collect data for the real user(s); HR and Senior Managers

  • Replace blank forms with a product that automatically creates simple conversation notes that are meaningful to the employee and manager

  • Use technology to extract the necessary data from the conversation notes so it can then be used by HR and/or senior management for reasons such as training plans and/or remuneration reviews.

And finally

  • Replace the use of performance improvement plan for managing poor performance with a process that identifies and resolves the management problem caused by the poor performance. 

Designing systems using these principles consistently turns around the above statistics and we have never lost an unfair dismissal case.

By adopting thee design principles you too can create a process that is simple and meaningful, provides timely and useful data to the real end-users, and delivers value to your organisation.

The first step is simply to remove the elephant from the room.

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