Performance Appraisals: In or Out (and How To Decide)?

“I’m a four.”

“I’m a five.”

“I’m a three and that’s not good.”

“I don’t have a number, so I do not know where I stand.”

Performance ratings, indeed the whole performance management process, has been making headlines and is increasingly prevalent on conference agendas. The conversation started with a few high profile organizations a few years ago who decided to disrupt their performance management systems, thereby upending the usual numerical assignments given to employees on an annual basis as an indicator of the quality of their work performance. The question is why did they do it and do their reasons translate to your organization?

It is a good question. Is this a “bright shining object,” just the latest squirrel that catches our gaze? Or is it a fundamental shift that all organizations will eventually adopt? Before delving further, let’s define the changes that some organizations have made. These changes do not resemble a monolith but rather, a smorgasbord. The most common change is to move to more frequent interactions between managers and employees, dispensing with the annual method. After that commonplace change to performance management, there is an array of choices; for example, organizations can keep numerical ratings or eliminate them; use performance appraisal forms but eliminate the numerical rating system; create a new rating system based on competencies or values; or add crowd sourcing input but keep the rating, and on it goes. And the incredible variety of changes made to performance appraisal methodologies makes sense because the reasons to make a change in the first place are unique to every organization.

So why make a change at all? After all, change is hard and a change to your performance management systems, which is really a decision making system, impacts many other human capital systems, such as compensation, for starters. Also impacted are promotions, development, the rationales for terminations, and layoffs. There are more impacts but the point is to not underestimate the ripple effect or unintended consequences of this kind of change.

With that context, there are three things you should consider before making a change to performance management in your organization. These the three “R’s”:

  • First, identify the RATIONALE for the change. You need to be clear on why you want to make the change to your system. Consider the following factors in your analysis: Is your performance management system misaligned to the manner in which you conduct your business? Or are your employees and managers dissatisfied with your current system? If so, why? Are there issues with the appraisal form? The annual review process? Or the on-going management of performance?  The combination of business and people dynamics will help you determine your rationale.
  • Second, the READINESS of your managers and employees to make the change. For example, if you deem the time to complete a review too high (Deloitte’s estimate was 28 hours per review), providing more regular feedback could eclipse your current figure.
  • Third, foresee the REACTION to feedback. Much has been written about how providing constructive feedback during a performance review can create a “fight or flight” reaction, thus “emotionally kidnapping” the employee. It has also been reported that some age groups want and even demand more feedback. A blend of “build on your strengths” and accountability need to be incorporated in any regimen of communication.

Lists are great and at the same time, generally incomplete. Your decision to modify this critical human resources system needs a holistic assessment of the organization and a thoughtful plan of implementation and evaluation. If this sounds like a daunting task, it is. But help is coming in the form a new class starting on February 13, 2019, “Performance Without Appraisals.” If your organization is thinking about moving away from the annual performance appraisal, this class is for you. If you are wondering if more frequent conversation between managers and employees will improve your business results, this class is for you. If you are curious about the research, the positive and negatives, and the factors for success of such an intervention, this class is definitely for you.  Register today using our Training Catalog.