Does Performance Appraisal Work?
Organizations are being challenged to find and keep the right talent to meet their business objectives. Fundamentally, organizations want happy and engaged employees as it makes our jobs as leaders a whole lot easier. Many leaders say they manage good teams but often have one or two employees that create challenges, and take up a lot of time and emotional energy to manage. Most companies have a formal performance evaluation and review system, and in many cases a lot of effort has been spent developing a performance evaluation process that is intended to help managers and employees increase their performance, job satisfaction and morale.
In a variety of organizations where I have worked I have evaluated their formal performance evaluation and review systems, and very few would say that employee performance, job satisfaction, or morale is any better over time, even after conducting performance reviews. In fact, we are finding time and time again that managers are avoiding the evaluation and review discussions all together, citing it takes up too much time and no one takes away anything concrete from the experience. So, they go along without doing a formal review or providing performance feedback, and interestingly, performance and job satisfaction does not degrade as much as one might expect. But here is the “but”: performance seldom improves in this instance. The lack of a system does not change the fact that most people really want to do their best in their jobs but they struggle to find concrete ways in which to improve their performance.
So what is going on? For many organizations performance evaluations focus on rating systems, where managers will evaluate employees’ performance against a 5 or 6 point rating scale and a description of how well they have met expectations, from “does not meet”, “does meet”, “very good”, to “exceptional”. While ratings are intended to be an objective and expedient way to evaluate performance so employees know where they stand, what actually happens is that ratings detract from the intent of the performance conversation. Employees often get fixated on the “number” and quickly make an interpretation, accurately or not, of how well they stack up. It is easy to see why, “4 out 5” can mean many different things to many different people. Organizations also struggle with consistency of ratings. Managers find it difficult to apply a consistent approach to evaluating their employees without falling victim to certain biases, thereby producing evaluations that miss-represent the true performance of their teams. More than a few managers have admitted they force ratings upward in order to save employees from stricter discipline or layoff risk.
What we do know is that happy and engaged employees feel that they are working for a company who cares about them as a person, provides them the environment to be successful personally and professionally, offers opportunity for challenge and learning, and has a culture of strong corporate values. In order for employees to feel this way, there is structured time spent in “open and honest conversation” on an ongoing basis, where managers and employees explore the areas that meet the needs, both of the employee and the organization. In this environment, people are motivated to do their best and are often open to feedback of any sort to help them achieve their goals.
So, how do performance evaluation and review processes look in this setting? There are two criteria that all successful systems have; 1) Alignment between the success of the employee and the business, and 2) Clear, well managed conditions for high performance. Effective processes open conversations to explore the needs of employees and the business and establish clear, shared performance expectations (utilizing a detailed job profile as a reference guide). Growth challenges and learning opportunities are used to align the goals of the individual with the organization. Feedback delivered against a backdrop of high alignment is seldom received defensively; it is valued information that is quickly used to improve.
Once a foundation of alignment is created, the five core conditions required for great performance can be easily managed for success, ensuring that people; 1) … know what to do and why, 2) …are able to do it, 3) …are equipped with everything they need to succeed, 4) …are motivated to succeed, and 5) …interactions with others support their success. A system that produces the foundations and support for great performance does a lot more than simply evaluate people.
Many organizations attempt to use simple evaluation processes as a method to drive results. These organizations must mature to the point where they can see that what they aspire to, and need, is great performance in an environment of high alignment. Only then can a business craft a true performance improvement environment and sustain it with the leadership and the capabilities required to succeed.