Awhile back I had a question from an HR professional about how to deal with their performance appraisals in the face of the economic downturn and the fact that the organization had not been able to provide any pay raises in a number of years.  They indicated that the annual exercise was becoming more of a chore and both managers and employees were leaving the meeting increasingly dissatisfied.  This is the response that I shared with them.

Before I share my thoughts I want to also share my assumptions.  After all, I don’t have a clear understanding of your situation, just a brief sharing by you regarding your situation.

Assumption #1 – your organization is a typical organization.  This isn’t meant to demean or be insulting, but the statistical odds are that your organization is going to be a lot closer to the average rather than being the exceptionally great or exceptionally poor organization.

Assumption #2 – that as a typical organization, you have the typical levels of employee engagement.  This means that you have only about 1 in 4 employees who are passionate about their jobs; about 1 in 5 who don’t like the organization and maybe want to hurt it; and the rest, about 1 out of 2, are just doing what they have to be doing to get by.

Assumption #3 – that as a typical organization, you are utilizing the same typical approaches to managing employees and performance as most other typical organizations are utilizing.

Assumption #4 – by performance evaluation you mean the annual (sometimes more frequently) event where a manager sits down and fills out a form which rates individual employees on a variety of predetermined factors.  These factors are most likely rated subjectively, and they may or may not (most likely do not) directly impact upon the overall performance of the organization.  They are also usually focused more around the activities or actions that an employee “should” take, rather than on the outcomes of activities or actions.

Assumption #5 – based on the typical organization, and upon your question, neither you nor your organization find your performance appraisal/evaluation system particularly valuable on its own, as it has only been used to dole out pay increases, which have not been available for some time and it may be awhile longer before they will be available.

Now, based on these assumptions, I’d like to offer some very radical thoughts for you.  You mentioned that someone shared that they were happy that they were not in your shoes and that they thought you were between a rock and a hard place.  I happen to disagree.  I think you are in a wonderful opportunity to actually make a difference in your organization; not only to save it time, resources and money, but to actually help the organization improve performance and better meet the needs of your citizens.

I am sure that you have heard a lot of opinions, but I would like to share with you some information from research about performance appraisals.  First, a quick quote from Jim Collins, author of “Built to Last” and “Good to Great.”  This is from his monograph “Good to Great and the Social Sectors.”  “When you compare great companies to good ones, many widely practiced business norms turn out to correlate with mediocrity, not greatness.”  From my over 10 years of research, annual performance evaluations fall into this category.  It seems that everyone does them; few do them well; and the annual ritual, itself, offers no value.

I spent an initial 3 years reviewing a vast body of research with a focus on finding those things that impact on organizational performance.  My goal was to find what set the best organizations apart from the rest.  In reviewing hundreds of studies, not one found that doing performance evaluations contributed to exceptional organizational performance.  If anything, they tend to detract from performance.  One study even found that the widely practiced use of 360 evaluations actually resulted in a negative return.  And on more than one occasion performance evaluations have lost lawsuits for the employer.  8 years after the initial research I still cannot find support for annual performance appraisals.

The things are of value aren’t tied to the actual event of performance evaluation.  You don’t need to sit down once a year with a form for a manager to provide ongoing performance feedback.  You don’t need to sit down once a year with a form for a manager to work with an employee to develop them.  You don’t need to sit down once a year with a form for a manager to discuss organizational goals and how team and individual goals help contribute to the achievement of those goals.  You don’t need to sit down once a year with a form for an employee to know how well they are doing towards meeting their goals.

I often hear from HR professionals that at least the performance evaluation forces the manager to discuss performance at least once during the year.  This is ludicrous!  If the manager isn’t doing this on a regular basis then they are not doing their job!  The number one responsibility of a manager should be to engage their employees so that the employees can achieve the goals of the organization.  HR’s number one goal should be to help management in engaging their employees.  Does your performance evaluation program engage your employees?  Or does everyone dread dealing with them with the exception of possibly gaining a pay raise, which they may or may not get because of factors outside of the manager’s control?  And how engaging was it for those employees who didn’t get the pay raise?

For a moment, let’s forget about the cost of low employee engagement levels to your organization and let’s focus on the direct costs of conducting these performance evaluations.  How much time does each manager spend in preparing for each individual employee’s evaluation?  How much time does each employee spend with their manager going over the evaluations?  How much time does other staff spend handling the paperwork from these evaluations, either before or after they are conducted?  How much does it cost to print off the forms that are used in the evaluations?  How much does it cost to store these forms after they have been filled out?  How much value are you getting out of this ritual compared to the cost?

Clearly, there is a lot of cost savings to be had from stopping this archaic process.  But I think you also have a wonderful opportunity to begin to make some changes in your organization that can actually help it perform at a higher level.  This is a perfect opportunity to justify the cost savings of getting rid of the annual event while helping to embark your organization on a different course of action.  Get rid of your performance evaluations along with the elimination of your pay raises.  Then over the next couple of years start developing your managers so that they can engage employees and drive organizational performance.  During this time teach every manager how to:

• Create cascading team and individual goals that are aligned with the organizational goals.
• Develop real-time objective performance measures that the employees can monitor on their own.
• Focus on results and not on tasks.
• Catch people doing things right, not on catching people doing things wrong, redirecting behavior only when it is a serious problem.
• Stop wallowing in the failures of the past and keep themselves and their employees focused on achieving goals and results of the future.  Deal with failures immediately and utilize them as a learning opportunity, not a discipline opportunity.
• Ask employees questions about their performance in such a way as to help them find their own solutions to issues and problems so that they can continually improve their performance.
• Develop employees’ strengths and stop trying to fix what wasn’t put in.

Of course, this means that your organization must have a clear Vision of an Aligned Purpose, Values, and Goals in order for your managers to connect individual employees and their individual goals to.  It means that you have to have the other performance support systems that will give managers the tools that will allow them to Build Trust and focus on their Strengths so that employees can become connected.  It means that there needs to be the developmental systems available to allow employees to take Personal Responsibility rather than systems that focus placing blame, which destroys Trust and Personal Responsibility.  But it is far more productive to create and support these systems rather than supporting a system that simply does not provide any value.

Make a Great Day!