Performance Appraisal has evolved over time but has retained, so far, its distinctive feature in terms of being evaluative and judgmental. In the final analysis, this has proved to be detrimental to the stated superordinate goal of performance management, which is to improve overall performance. It is worth recapitulating why this happens:
- It’s past focussed and not future focussed. The emphasis, therefore, tends to be on explaining and justifying the past rather than anticipating and preparing for the future.
- The traditional mindset of a top-down conversation, between manager and employee – with hierarchical connotations – has further reinforced the defensive mindset.
- The multiplicity of goals. Several companies tend to introduce multiple objectives into the process. Aside from performance improvement, the other goals found in various companies are succession planning, career planning, training plan development, capability assessment, and a few others.
- Forced rankings. A legacy of the military forced rankings and reward linkages to distort the process considerably and work well when the environment is stable and predictable. In the VUCA world we live in, these make no sense at all.
- Generational changes. Gen Z and millennials describe the process as broken. Members of these cohorts are interested in personal growth and organisational development as much if not more, than their older cohorts but the nature of the process does not appeal.
- The process often tends to emphasize documentation and record-keeping more than it does the qualitative aspects of discussion and development. Partially this may also be due to poor training of line managers but is now a widespread reality.
- It is a one-time event – typically at the end of the performance year, perhaps in some rare cases twice a year – and does not have an ongoing, consistent theme underlying the process.
The system is broken, and changes are already being made. A quick summary of the changes with examples is outlined below.
1. Process goals are being recast
At a Juniper Networks townhall several years back, a young engineer railed against the arbitrary and evaluative nature of the performance appraisal process. The leadership took the suggestion seriously but instead of scrapping the process altogether (which was what the unspoken argument was), recast the process goal to focus on placing people in jobs that best utilize their strengths and did not expose weaknesses. This led to a further realignment of downstream processes and Juniper now claims a job: person fit ratio in excess of 90%.
2. Emphasis on peer feedback as opposed to the traditional manager
Employee feedback process. Variably called 360 reviews, peer feedback, and multisource feedback, these processes focus on getting feedback from a variety of sources on the individual’s performance. While theoretically, these could be either internal or external to the company; most companies prefer to tap a variety of internal sources, not wanting to risk an employee’s credibility by forcing external parties (vendors, customers, etc) to evaluate an employee. Nevertheless, the range and depth of feedback improves under the circumstances. However, some companies have reported politicisation of the process (employees gaming the system either to give each other positive feedback or alternately, using anonymous processes to give arbitrary and aggressive comments that don’t really qualify as feedback). Online systems have made this process easier to implement and at least in some companies, processes are not anonymous anymore. These forces respondents to measure their words and feedback a little more carefully, perhaps at the cost of eliminating what may have been useful feedback on issues emerging on the horizon.
3. Keeping feedback ongoing
Moving away from the annual evaluation format is perhaps one of the more exciting changes being experimented with. The focus is simply on making sure that feedback and improvement suggestions are available as an ongoing process, and have been tried out notably in new-age IT firms and the gig economy. Microsoft, Cisco, and Adobe are examples of this. Feedback is available in as close to real-time as one can get, from a variety of sources, and made accessible for consideration by the individual (rather than through a hierarchical process). While brick and mortar companies have been considerably slower in picking up on this idea, it is inevitable.
4. Moving away from documentation per se and focussing more on the developmental conversation and action
Companies are focussing on improving their training resource allocations and linkages to the performance management process in order to ensure that individuals can pick up quickly on feedback and act on it in a way that shows incremental and noticeable changes as soon as possible.
5. Most importantly, putting the future into performance management
Interestingly it is not just new-age companies doing this. Even an established old economy company like the drugmaker Colorcon has abandoned annual appraisals, em[powering supervisors to provide feedback as often as weekly in some cases and hand out small bonuses to reinforce desirable behaviours. This has reduced the defensiveness in the process, moved employees to focus on future-ready behaviours and moved away from the high-stakes nature of the reward linkage that most companies practice. In a stroke, moving away from the evaluative, past focussed nature of the legacy process has resulted in significant gains in performance, agility, and future-readiness – all fundamental to ensuring that companies thrive in the world of today and tomorrow.
Stepping back, the entire process is evolving at a rapid pace and gaining in focus in the areas where it really counts as a strategic driver of the business: readiness for the future, agility, preparing for an uncertain world with dynamic changes and keeping the focus on individual skills and capabilities, both hard and soft.
A key indicator of the future will be how reward systems change and evolve, in order to keep pace with the declining importance of inputs from the performance management process
Nevertheless, there are exciting times ahead for the HR function and people management processes in general as performance systems continue to evolve and gain traction.
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