A contrary look at employee performance appraisal

Canadian Manager, The, Fall 1999 by Tom Davis, Michael Landa

Background

For the last 50 years, it has been an article of faith that investment in employee performance appraisal has contributed significantly to increased worker productivity. It may be time to re-examine this assumption as organizations face the need to achieve real increases in productivity as the "lean and mean" nineties come to a close.

Forty years ago the same issue worried at least some management theorists. Writing in the July 1959 issue of the Harvard Business Review, Rensis Likert offered this critique of performance appraisal:

The aim of reviewing the subordinate's performance is to increase his effectiveness, not to punish him. But apart from those few employees who receive the highest possible ratings, performance review interviews, as a rule, are seriously deflating to the employee's sense of worth ... not only is the conventional performance review failing to make a positive contribution, but in many executives' opinions it can do irreparable harm.

It appears that few executives were listening to Likert's critique of employee performance appraisal, as the practice then, as now, is nearly universal in professionally managed organizations. Appraisal continues to be integral to compensation and linked, at least informally, to succession planning and promotion decisions.

However, in many organizations the appraisal process has become little more than a pro forma. Employees and their supervisors often find appraisal both painful and demotivating. This distrust of the appraisal process is largely due to perceived links between appraisal and decisions about compensation and promotion. In spite of this contradiction, the overwhelming majority of firms persist in their commitment to the traditional supervisor evaluation approach.

Within this context, a look at the data on appraisal today reveals some disturbing facts. In 1997, Watson Wyatt Worldwide, a consulting firm with global interests, undertook a national survey of 2,004 Canadian workers. These workers represent a cross section of employees based on gender, age, industrial sector, union status and nonsupervisory vs. Management status. This Watson Wyatt WorkCanadaTM study looked at the internal systems within organizations acknowledged to be intrinsic to organizational success. Among these they examined "the motivation system," where performance appraisal is a pivotal process.

Summary Findings

Watson Wyatt's key findings included the following:

* less than two-thirds of the sampled employees (60%) said that they understand the measures used to evaluate their performance

* even fewer sampled employees (57%) thought that their performance was rated fairly

* less than half (47%) said that their managers clearly expressed goals and assignments

* only about two-fifths of the sample (42%) reported regular, timely performance reviews

* even fewer (39%) reported that their performance review was helpful in improving their on-the-job performance.

* fewer than two in ten employees ( 19%) report a clear, direct, and compelling linkage between their performance and their pay.

For most employees, appraisal is at best a highly stressful process with little or no perceived connection to their compensation. At worst, employees see it as a figurative whip in the hands of management.

Perception, Judgement and Fact:

What we believe to be the spectacular failure of performance management techniques such as employee performance appraisal, is due to the "judgmental" nature of these processes. Few appreciate being subjected to the judgement of others, particularly when compensation and career are on the line. Performance appraisal rests solely on the judgement of the appraising manager and the process generally lacks a "bias control" methodology. The judgements inherent in appraisal often decide compensation and career progression and the employee has little or no opportunity to influence the outcome of a process that is by nature a oneway, top-down communication.

Appraisal based solely upon judgement can result in the closure of communication between leader and employee around the performance issue. This negative impact may outweigh any benefits of the process. Further, leaders often behave as if performance appraisals deal in "facts", rather than,"perceptions" of questionable validity. There is rarely consideration given to testing assumptions, identifying and filtering out biases or to validating the data surfaced through the appraisal process.

It is not surprising that performance appraisal can generate feelings of isolation and stress for both leaders and their employees. It is difficult to understand how this process can be seriously considered a viable method for increasing motivation and productivity.

Management, Communication and Employee Performance

Watson Wyatt offers the following restrained criticism of Canadian management in promoting communication within their organizations:

"... performance management is an area where the few successes seem to be largely offset by the opportutunities for improvement. "