Many articles in the past few weeks have called for an end to traditional performance appraisals – appraisals where a manager considers an employee’s past performance on the job and rates them against a number of criteria.
Criticism of appraisals
There are perhaps two valid criticisms of ratings-based appraisals.
Firstly, research over the years has consistency shown that each person asked to rate returns a score at variance with others. This means that the most complex – for example a 360-degree appraisal with colleagues, managers, internal customers, external customers, suppliers and even subordinates all chipping in – will yield six differing average scores. Such variance arises from the application of different systemic biases held by rater group members and begs the question as to which to believe and how to aggregate them.
360-degree ratings developed because the Internet made sharing and amalgamation of data possible, rather than any particular academic research showing their value.
Secondly, research into the expectations of Generation Y shows a general disquiet with management, accompanied with a strong self-image. In such an environment, rating-based appraisal is hardly likely to foster motivation in that group of 20-35 year-olds – particularly when it has such questionable validity.
Generation Y employees crave sound relationships with managers, who they expect will invest in them, set developmental goals and give useful feedback rather than judge.
One could add to this the poor press that ratings systems have attracted in light of edicts to force managers to fit ratings to a normal curve. Heaven help those in the lower decile destined for dismissal.
So anyone looking at implementing a performance appraisal system would be wise to think hard about the ramifications of anything ratings-based in today’s business.
To judge what makes a good performance appraisal method, one must first determine what it’s for, and what each party wants to achieve.
There are two common goals in introducing a performance appraisal system. First, the manager seeks a platform for providing feedback to the employee in an effort to have the employee modify their behaviour. Second, the manager wants to establish gaps in the employee’s skills and knowledge that prevent performance. So traditionally the appraisal has been both corrective and developmental.
Notice that there’s no trace of any intrinsic need to ‘rate’ the employee, so it’s anybody’s guess why rating emerged. It’s perhaps something that came from society’s desire, back in the 70s, to measure everything, including people.
But there’s congruence between the needs of today’s younger employee (relationships, feedback, goals and development) and management aims – though there’s little congruence with popular methods.
Role of self-appraisal
One rater ‘group’ from the traditional methods is of course the employee themselves. Research shows that employees tend to be more lenient (on themselves) than other raters and if they are the only rater, that’s a significant problem. Research likewise shows that typical bosses take a father-like position: employees rarely perform to their liking.
The core of appraisal is the review meeting when manager and employee come together to discuss the employee’s performance and their future. Both parties form opinions before the meeting and make their preparation from those positions.
Typically the employee has a high opinion of himself or herself.
Traditionally, appraisals led to pay rises and progression. There was a lot at stake in the appraisal meeting. Traditionally, therefore, the meeting started with confrontation, with both parties starting from different viewpoints and working to defend their position.
Applied today, such an adversarial game would not be to Generation Y’s taste, deepening their antipathy of management.
So the modern aims of appraisal are laudable: managers want a platform for giving feedback (to change behaviour) and establishing development needs and employees (represented by Generation Y) want to have opportunity to build relationships with their manager, set developmental goals resulting in developmental investment and gain useful feedback. Both sets of aims are tantalisingly similar. But, prospectively, little will be achieved if both departure positions are so far apart. Certainly relationships will have rarely improved by the meeting end.
The fundamental flaw in this traditional system is that the parties ‘rate’ the employee’. Typically appraisers rate against job requirements, behaviours, outcomes achieved and job performance. And rating is an opinion. Arguably, the damage is done in the meeting as soon as the manager says “I think that you….”.
What’s needed is objectivity with an external reference that becomes the focus of the parties’ discussion. The manager needs to allow employee self-appraisal whilst knowing that capitulating initially to the employee’s point of view will be short-lived if objective measures prove the counter-position.
That objective object upon which both manager and employee can focus is the organisation’s strategy – or at least the little bit of corporate strategy to which the employee contributes and has some small responsibility.
One of history’s best approaches to capturing strategy is the Balanced Scorecard, first postulated by Kaplan and Norton in the 90s, and now taught in every business school. The BSC asks management to define the organisation’s mission, values and vision and further set objectives against main headlines of money, markets, processes and development. Kaplan and Norton’s approach does not say how the strategy is arrived at – bigger ideas like those espoused in Johnson, Scholes and Whittington’s excellent text on the subject are needed for that. But the corporate BSC tells what the organisation wants to achieve.
Now, the neat thing about the BSC is that it contains all the headlines that the manager and employee, as parties to what we’ve so far referred to as an ‘appraisal’, need. Their need is of course at a much ‘lower’ level – at a level of operation that’s meaningful to the employee.
But nonetheless, the corporate BSC is nothing but a high-level statement of what all the staff and managers in the firm intend. And the corporate BSC can be decomposed to yield goals for each departmental, group and individual. There’s similarity here with Drucker’s management by objectives (MBO) of yesteryear but with a much-evolved structure.
The future of appraisals
We’ve argued here that a ratings-based appraisal system is systemically flawed. Its adversarial heart no longer fits with today’s employees’ beliefs and attitudes. And yet the benefits of manager and employee sitting together to discuss past and future is universally recognised to be of immense benefit.
To build on the positive self-image of new generations of workers, we need to implement an instrument around which the parties can discuss – something that is relatively objective, something that represents the organisation, or at least some local, meaningful part of it. That something is the Personal Balanced Scorecard (PBSC).
With the PBSC, the manager can ditch his or her opening position. It’s not “I think that you…” but “How have you fared against your marketing objectives…” or whatever. As an aside, the PBSC also allows a format for a very diverse set of objectives. You’d be surprised how many employees have marketing objectives!
The PBSC allows management by goals. Management by goals is possibly the very best way of motivating staff. It’s a weird thing, but we all like to be set challenges.
And finally, the PBSC allows frequent meetings. Annual appraisal must be a thing of the past. Frequency of review of progress and future planning will depend on the nature of the business but monthly or at least quarterly will suit most.
Meetings (and objective, adult, evidence-based discussions) build relationships. Long live Generation Y. Welcome to the work-place, Generation Z. It’s really a nice place to be.
Call us if you want to talk about performance appraisals of all types.