The death of the appraisal has been long foretold. Indeed, in the May-June 1957 issue of the Harvard Business Review, Douglas McGregor critiqued the, by then, standard practice of performance appraisal and suggested an appraisee led approach to the entire process.
Later on in this piece we reflect on the latest, most marked and radical developments. For the moment at least, the conventional wisdom prevails that you should assess recent performance and focus on future objectives and opportunities. This in turn is a one of the key tools of performance management, the bringing together of all the activities that contribute to the effective management of individuals and teams.
In late 2014, Kaplan carried out a survey among 170 companies on their staff appraisal programmes. The findings were somewhat contradictory, in that over 89% of respondents said they find the appraisal process “very valuable”, but almost 37% of respondents agreed that appraisals are seen to be mere “tick box exercises”. A strong 84% said they felt appraisals have a positive effect on individual performance, and 84% agreed that appraisals allow companies to manage staff better. Yet despite respondents claiming that appraisals make managing staff easier, over 17% said they do not share business objectives with employees, and one in five companies said they do not set staff development goals. Without disclosure of business objectives and without development goals in place, staff are likely to be more difficult to manage.
According to the UK’s Chartered Institute of Personnel and Development (CIPD), performance management is about “helping people to understand how they contribute to the strategic goals of an organisation and ensuring that the right skills and effort are focused on the things that really matter.”1
Staff appraisals are still widely perceived to underpin the performance management process. In a CIPD survey, 83% of respondents agreed that performance appraisals – along with regular reviews, feedback and assessment of development needs – are critical components of performance management, contributing to the process by which employees:
- Know and understand what is expected of them
- Have the skills and ability to deliver on these expectations
- Are supported by an organisation to develop the capacity to meet these expectations
- Are given feedback on their performance
- Have the opportunity to discuss and contribute to individual and team aims and objectives 2
In 2012, a separate CIPD report claimed that “whether formal or informal, performance discussions help you to get the most from your workers”.3 Indeed, the staff appraisal process provides a vital mechanism for optimising output and ensuring business plans can be delivered at all levels.
So what can you do to ensure that you derive maximum value from your company’s appraisal programme?
Honour the process and the purpose
- Agree individual development goals during appraisals
- Share broader strategic objectives with employees
- Ensure direct reports and line managers spend equal time preparing for appraisals
- Ensure senior level sponsorship and role modeling
- Support and train both appraisers and appraises in the skills and insights needed for successful appraisal conversations
- Hold reviews on a regular and one-to-one basis to reinforce the importance and of the exercise and its place in performance and progression
- Link appraisal results to progression opportunities
New insights and trends
Having stated at the beginning of this piece that the demise of the appraisal has been long predicted, some organisations, including major ones are looking seriously at the effectiveness of long established processes.
The thief of time
Global professional service firm Deloitte are redesigning their performance management system for their 65,000 employees worldwide.
Part of the motivation for this change is the realisation that the whole process – holding meetings, completing forms, creating ratings – consumed nearly 2 million hours a year, and that many of those hours were spent discussing outcomes rather than in face-face- conversations.
One of the key parts to this radical redesign is the reframing of three key performance management objectives – to recognise, see, and fuel performance.
Recognise is the unambiguous desire to recognise performance through variable compensation.
See is the objective assessment of performance, where there are two principle changes: reducing 360 and upward feedback and focusing on the immediate team leader; asking them a different type of question – what they’d do with their team members, not what they think of them.
Finally, the focus is moving from “management” of performance to improving performance, articulated as fuel performance.
Ratings and the bell curve
Deloitte are also reviewing their use of ratings. The starting point is not whether the system is fair or achieves stated objectives, but the fact that there is a single number
My own experience is that where the use of a normal distribution (‘bell curve’) approach in organisations is perceived to lead to ratings “quotas”, it is a major cause of cynicism about the process. As these approaches are most likely in large organisations, this may partially explain the lower level of engagement in companies with over 1,000 employees in our survey. Frequently, both understanding of the bell curve and implementation is poor at producing a forced normalisation.
Microsoft and Adobe Systems have decided to end all ratings. Infosys which employs 150,000 people is also rethinking the use of this statistical model to rate employees. KPMG in India (where they employ 8,000 people) began a pilot on the 1st April 2015 which could herald the end of this approach also.
Reasons cited for the trend away from the bell curve, include spending too much focus on individual performance (rather than team effort), unwanted internal competition, and a propensity to discourage employees from sharing resources and information with peers. Many internet era companies see the curve as less relevant to meet demands of the knowledge workers and ‘human capitol’ businesses.
The end of the affair
We have sought to understand the degree to which a wide range of UK companies are engaged with the appraisal process. Our experience is that training both line managers and appraisees in the skills of performance conversations can lead to significantly greater engagement and benefits to all – managers, direct reports, and the organisation in terms of engagement and retention. Nonetheless, as we have already described many organisations are looking again at time-honoured approaches to appraisal processes and performance management more generally.
Throughout our work in helping organisations with the effectiveness of appraisal conversations, we have always emphasised that the element of the appraisal meeting that looks at past performance should be a consolidation of known insights itself (because regular conversations have happened through the period). As mentioned above, Microsoft and Adobe Systems have ended all ratings and put in place a system that focuses on teamwork, collaboration, timely feedback, giving more flexibility to managers to hand out rewards as they see fit.
In ‘The End of the Performance Review – A New Approach to Appraising Employee Performance’, Dr Tim Baker goes further. His Five Conversations Framework is effectively a replacement for the traditional performance review system. It comprises five, 10-minute conversations between managers and their staff over six months.
More radical still are the ideas contained in ‘Holacracy: The Revolutionary Management System That Abolishes Hierarchy’ by Brian J Robertson. Essentially, it’s a way of running organisations that removes power from a management hierarchy and distributes it across clear roles to be executed autonomously, and without micromanagement. Individuals no longer have job descriptions, they have multiple roles, often on different teams, and those role descriptions are updated by the team actually doing the work. There is a traditional hierarchy with a series of interconnected, but autonomous, teams (referred to as ‘circles’).
There are no “People Managers” in the conventional sense, but Lead Links in each ‘circle’ will have performance conversations around effectiveness in role. There is a significant expectation of and opportunity for individuals to take control of their own development and progression.
At the time of writing, the largest organisation in the world using this approach is Zappos – a US based shoe retailer employing 1,500 people and renowned, excellent customer service and high levels of staff engagement. In transitioning fully into this approach, it appears that around 15% of employees may choose to leave because this level of empowerment and fluidity will not work for them.
We are also now hearing that Acccenture has announced that it is radically changing its performance management process, disbanding a once a year appraisal process (and ending rankings altogether). In its place they will move towards a continuous feedback culture.
Final thoughts and unchanging truths
Three things will remain as constant as they have ever been:
- Appraisal processes and performance management systems should be designed to support the culture the organisation is seeking to achieve
- Colleagues will continue to have performance and development conversations
- They will need advice, training and practice in order to do them well
As always, we invite you to share your experiences and thoughts on the subject.
1 CIPD: Performance Management in Action – current trends and practice, 2009
2 CIPD: Performance Management in Action – current trends and practice, 2009
3 CIPD: Performance and Retirement Practices – get it right, 2012
The value of staff appraisals: Employers Views – Kaplan business insight report
“Holacracy: The Revolutionary Management System That Abolishes Hierarchy” by Brian J Robertson.
Harvard Business Review
“Reinventing Performance Management” by Marcus Buckingham and Ashley Goodall, Harvard Business Review, April 2015
“The End of the Performance Review – A New Approach to Appraising Employee Performance” by Dr Tim Baker
Ingle Dawson, Senior Leadership Consultant, is an award-winning consultant and expert in change management and leadership. He thrives on making a real connection between ‘people’ and ‘commercial’ issues to generate clear business benefits, and is passionate that development programmes are delivered in a stimulating, participative and enjoyable manner in order to make sure the changes stick.
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