Performance appraisal revolution under way

Pat Schutz
Pat Schutz

There’s a not-so-quiet revolution under way in the business world as many organizations abolish their performance appraisal systems.

In just one example of recent surveys, Corporate Executive Board Global found stark evidence of the high level of dissatisfaction among managers regarding PA systems. According to the research, 95 percent of managers are dissatisfied with their performance review management systems and
59 percent of employees feel performance reviews aren’t worth the time invested. The same study found 56 percent of employees said they don’t receive feedback on what to improve and 66 percent of performance management systems misidentify high performers.
On another note, nearly 10 percent of Fortune 500 companies have done away with annual ratings.

To understand the magnitude of dissatisfaction and frustration among corporate leaders and employees alike on this issue, you might want to read those statistics again.  And add an exclamation point or two. I certainly did.

The businesses that are rebelling have decided the traditional format of having supervisors annually evaluate the work of their subordinates is inadequate for their purposes, which is understandable since the primary purpose of performance evaluation is to encourage and guide employees toward improved performance. If the PA system calls for an annual evaluation, the system is past-oriented by design. This type of system uses past employee performance to inform decisions about future performance expectations. It’s certainly traditional. But is it beneficial and expedient in today’s highly competitive and lean organizational structures? Does past performance behavior accurately predict future behavior?

The traditional PA is designed to rate employees’ past performance using such traits as appearance, creativity, customer service and loyalty. To add to the confusion of supervisors faced with rating subordinates on those highly subjective attributes, those same managers are expected to choose an appropriate rating item from poor to excellent, usually on a five-item scale. Unfortunately, the rating items themselves are rarely well-defined and the gaps between items, such as competent (typically a three) and highly proficient (a four), leaves supervisors to fend for themselves and literally fill in the missing meanings with definitions of their own. Consequently, subjectivity and bias are negative characteristics solidly built into the traditional PA. Even such enlightened formats as the forced distribution method or 360-degree feedback have their faults when used in isolation from other methods.

In addition, most companies require one-on-one meetings between supervisors and subordinates for the purposes of providing constructive feedback. If that meeting does occur, supervisors are rarely trained in effective techniques for providing useful feedback to subordinates who often leave those meetings confused and disheartened. Supervisors generally feel the same way.  So much for using traditional performance evaluation systems to encourage and guide employees toward improved performance.

But, wait. Weren’t automated PA software programs supposed to take care of those shortcomings? The answer is two-fold. Yes, they were supposed to improve the objectivity of the traditional system. No, they did not. Most of the automated software PA systems have turned out to be little more than digitized versions of our old, flawed procedures. We asked software developers to help us to make our PAs more efficient, and they did what we asked.

So, what type of non-traditional PAs are such companies as Accenture, Adobe, Deloitte, Gap, GE, Microsoft and Netflix using to replace traditional PAs?

The answer won’t surprise you if you’re a proponent of actively helping employees become engaged in their work. Finding ways to observe employees and interject praise and helpful criticism in a timely manner have long been preferred methods of performance-oriented managers. Those companies retiring traditional PAs seek innovative ways for managers and subordinates to interact continuously. Businesses large and small have turned to spontaneous one-on-one meetings, constant coaching, accurate and data-driven records of performance and transparent pay structures

John Naisbitt coined the term “high tech, high touch” in 1982, and it seems appropriate in the quest for the ultimate performance appraisal methods. We have the technology to design complex algorithms and electronic PA delivery systems. But we also have the knowledge of organizational behavior to guide us in how to use powerful high-touch employee engagement approaches. Many businesses experiment in real time with these types of approaches and bet they’re the foundations for the performance appraisal of the future.