Should we kill the performance review system, how to replace?

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Performance Appraisal time, for anyone, whether a fresher or even one of the most seasoned managers – has always been a time to buckle up a bit; to muster the courage to face the Boss; all the while feeling kind of feverish. After all, it is time to get ‘evaluated’ for one’s performance. It is usually an awkward time; seemingly biased; and of course, the phobia of being ridiculed – made to feel apologetic for all those incomplete assignments, etc. finally one concludes that he or she got leveled and labeled! Seldom, there is a feeling of being euphoric and valued for!

In the recent past years, some of the globally reputed fortune 500 corporate houses distanced themselves from this kind of an age-old practice of ‘Bell-Curve’ ratings. But, it was not very sure the alternative practices that got introduced as its substitute systems, achieved their intended results.

The fact remained, the majority of the Organizations, who got rid of the ‘bell-curve’ of the performance appraisal systems, retained their ‘grading’ and ‘ratings’ still. The long-drawn-out sketch remained hazy and ratings were done subjectively and discreetly. The irony was that the input of the concerned colleagues was not solicited. Finally, people were evaluated almost in the same old style; so, in a way, the much wished-for improvement was in ‘letters and not in spirit’.

When we discuss this sensitivity, it is, after all, one’s performance, which is the ‘value’ of the employees’ contributions. Challenge has been as to how to assess that value in a specific way. Importantly the Management has to decide about salary-hike, the elevation of grades i.e. promotions and a few other relevant topics for their employees at large. For different sectors of business, this assessment plays different roles as well. It is that event that is awaited by almost all the employees – from a sole perspective of being considered for either a promotion or a handsome salary-hike; not so much by the Top Management in comparison. 

Even if, we assume that the process of an appraisal does not help in any manner, it will be quite hard to deny the fact that the very process itself allows us to ‘document’ some kind of a rating of one’s contribution to the Organization. That in turn, helps the Management and the employees for various other purposes in the future. It was found out (reference source: an article in HBR by Lori Goler, Adam Grant and Janelle Gale) that at Facebook, as the result of discussions with focus groups and a follow-up survey with more than 300 people, it was clearly indicating 87% of their people wanted to keep performance ratings. It is worth quoting them here – “Yes, performance evaluations have costs—but they have benefits, too. We decided to hang on to them for three reasons: fairness, transparency, and development.

Not Being Biased: Being Fair

High Potential Performers (HiPOs) crave for being given feedback; fair and candid dialogue with the supervisors, help them to get motivated and in a way, most of them wish to be provoked to scale better heights in their deliverables. While so, it is quite obvious that they expect their performance evaluations to be fair. For them, not having evaluations is worse.

Worthy of reproducing the following important findings by Lori Goler, Adam Grant and Janelle Gale: “Every organization has people who are unhappy with their bonuses or disappointed that they weren’t promoted. But research has long shown that when the process is fair, employees are more willing to accept undesirable outcomes. A fair process exists when evaluators are credible and motivated to get it right, and employees have a voice. Without evaluations, people are left in the dark about who is gauging their contributions and how.”

Quoting from the same article – at Facebook, they say “when other companies eliminate performance evaluations, they still spend many hours agonizing over compensation decisions. For us, time invested in performance reviews is time saved on compensation.”

Not Being Translucent, Being Transparent Instead 

Performance evaluations do offer transparency. Employees are made to realize as to what are their value-addition and how their contributions are seen in the organization. More transparent is the process, the easier, it is for the organizations to effectively recognize and reward their high performers.

Upfront, spot feedback system, in their few various forms, came to help those who dropped the traditional performance evaluations. This new system helped people repeating their successes and learn from their failures. However, consequently, it did not actually help either of them; neither the organization nor the employees. Employees could not assess themselves how they’re doing overall. Research suggests some of the best of the defense services in the world can be referred to as having quite some credible transparent systems in their performance evaluations of their staff & officers. While not being straight-jacketed, people in such institutions are made to feel valued for, they do not get labelled.

Talent and Competency Development

When the oscillation of the pendulum was striking the extremes between the choice of the traditional appraisal process and the more concurrent ideas of annual reviews with frequent, informal check-ins between managers and employees, there was the emergence of the third angle to it. That was – whether migrating from the good, old performance appraisal style was being replaced with something that would dilute the very basis of developmental aspects, i.e.development of talents and their competencies. *Wharton’s Peter Cappelli and HR expert Anna Tavis dished out logic like-   annual reviews favor accountability over development—and that can certainly be true. But when conversations about professional growth are near-constant and untethered by ratings, people get overwhelmed. Facing a volley of feedback, employees often struggle to figure out which information matters most and what to ignore. A comprehensive analysis of 607 studies showed that more than a third of all feedback interventions backfired, decreasing performance instead of increasing it.

Without mincing words and quoting Peter Cappelli and HR expert Anna Tavis straight: “when people receive negative feedback, they often fixate on small points. Without ratings, they can spend weeks pruning a few trees while the forest is on fire. If a manager receives multiple pieces of feedback about being late to meetings but misses the larger issue of prioritization, he or she might become the timeliest person to deliver mediocre results. Performance evaluations allow for an overall assessment that helps people prioritize. Employees learn what their key strengths are and where they should focus their development efforts. Evaluations also serve as a forcing function to make sure that tough feedback is delivered rather than swept under the rug.”

Actually, many people have stronger reactions to not being rated. Small yet definitive steps, will surely help to revive the faith in the system, as they often share the feedback with their teams, normalizing the fact that even people who consistently deliver strong results sometimes have lapsed. *The solution here is not to throw out performance ratings but to build a culture that recognizes and rewards growth. Classic research suggests that people are often highly motivated when success is a coin-toss. With lower odds, they are more prone to give up, and with higher odds, they don’t rationalize enough effort or creativity.“Democracy is the worst form of government,” Winston Churchill had told in 1947, “except for all those other forms that have been tried from time to time.” The same is true for performance evaluations: They’re far from perfect, but they’re also far better than the alternatives.

So, we must not kill the Performance Reviews System!

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Bibliographyhttps://hbr.org/, https://psycnet.apa.org/

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