Introduction

At this part of the year, many organisations ready themselves to grapple with the fallouts of one of the most insidious, damaging, and yet ubiquitous part of corporate life – the Annual Appraisal Process.

The performance ratings (post the draconian Bell Curve) which set into motion a chain of positive and negative emotions.

For each happy employee, there’s a bunch of others who end up feeling they’ve been short-changed.

1. The winners laugh all the way to the bank.
2. The losers often update their resume and become active on job portals, determined that this would be their last appraisal cycle in this company.
3. The HR function braces itself for attritions and readies processes for the next round of recruitments

As a per a Deloitte survey, this process, is among the most damaging and disheartening process employees face each year. Only 8% of surveyed companies thought the process is worth the time they put into it, and the focus on rating and ranking takes the focus away from the coaching and development that people often desperately need

Self-appraisal Vs Boss’s Perception?

The ratings are largely driven by how the line manager views his sub-ordinate’s performance and not what the sub-ordinate thinks about his performance and often there is no congruence between the two.

In 2007, a BusinessWeek survey in America found that

• More than 80% of the middle managers believed that they were among the top 10% performers in their company
• 97% of the executives believed they were the best 10% of the lot.

Self-appraisal indulges employees’ delusion and boss’ appraisal masks organization’s limitations. The way to prevent cynicism is that the boss and the employee do the performance assessment jointly and arrive at negotiated agreement.

Time to Re-Engineer Performance Management

Bell Curve Vs Power Curve

 

The long standing belief that people performance follows the Bell Curve is the root of many failed performance appraisals.

People don’t perform like machines within a normal range. If they did, Microsoft would not have recently abandoned its bell curve rating system which resulted in the exodus

of top people to other companies over the past decade.

The Bell Curve (also referred to as the Normal Distribution) assumes that there are an equivalent number of people above and below the average (i.e., mean), and that there will be a very small number of people who are two standard deviations above and below the average.

In a bell curve model you tend to reward and create lots of people in the “middle.” People can “hang out” in the broad 80% segment and rather than strive to become one of the high-performers, many just “do a good job.”

Research conducted in 2011 and 2012 by Ernest O’Boyle Jr. and Herman Aguinis found that people performance did not follow a normal distribution, but rather something called the Power Law Distribution.

A Power Law Distribution is also known as a “long tail” since it shows that there are a small number of people who are “hyper performers,” a broad swath of people who are “good performers,” and a smaller number of people who are “low performers.” It essentially accounts for a much wider variation in performance.

In the Power Law Curve, most people fall slightly below the mean. Roughly 10-15% of the population are far above the average, a large population are slightly below average, and a small group are far below average. As such, the concept of “average” becomes meaningless.

Rating the ‘person’, not ‘performance’

In many cases, appraisals focus on “the person,” including characterizations of their personal “traits” (i.e. commitment), knowledge (i.e. technical knowledge) or behaviours (i.e. attendance). While these factors may contribute to performance, they are not measures of actual output. If you want to assess the person, call it “person appraisal.” Performance is output quality, volume, sales generated and responsiveness.

Cultural Norms

In some organizations, there are cultural norms and values that influence performance appraisals. For example, in my first organisation, new hires were automatically given an average rating for their first year, regardless of their actual performance. This can be grossly demotivating, especially because employees often give their best in the first stint only.

 ‘Recency Errors’

‘Recency errors’ come into the picture when managers evaluate based primarily on events that occurred during the last few months (rather than over the entire year). It is imperative that managers consult employee files and data.

Lack of objective measurement

Agreed that there would be a near-religious standoff on role of measuring performance.

1. The critics would cite Albert Einstein – “Not everything that counts can be counted; and not everything that can be counted counts.”
2. The advocates would spout Peter Drucker, who said, “If you can’t measure it, you can’t manage it.”

But as far as possible, objectivity helps

The ‘Chicken’ approach

Many managers act like “chickens” — they avoid tough decisions or confrontation. They provide no differentiation and spread “peanut butter” (an even distribution) to avoid it, while others give everyone “above average” ratings. Some will provide feedback that is extremely vague in order not to offend anyone. Rarely if ever is anyone immediately terminated as a result of the process. If the grain is not separated from the chaff, there is disillusionment at both ends of the divide.

The organisation must take a clear stand that these are the employees it wants to retain and these are the ones it does not mind leaving.

Frequency

In part, it’s the direct manager that is providing a coaching and supporting role as frequently as is possible throughout the daily efforts of the employee. Leadership, ergo, is about coaching and developing the performance of employees all the time, not once a year.

Performance management, therefore, is more like brushing your teeth (daily, two times a day ideally) versus the once a year visit to the dentist.

What if the manager is the actual villain?

People leave bosses, not organisations!!

The ultimate cost of an “unfair” assessment may be that it actually drives your top employees away

When an outstanding performer is not productively utilised and he/she resigns out of frustration with the line manager who did not believe in delegation or empowerment, the loss is entirely that of the organisation.

An outstanding employee’s ouster mainly because of a biased or subjective opinion by the line manager is something that is not uncommon in the corporate world.

Will resignation help the employee resurrect his/her career? Not necessarily. Who knows there may be a bigger devil in the new organisation?

It could be that merely a role change and a new boss could allow the disgruntled employee to begin afresh.

How to structure reviews?

Done correctly, performance reviews inspire greater and greater levels of success. They motivate people to contribute toward critical business goals to develop their skill sets, and to reach their full potential

People don’t want to go back to the school benches and be graded. If you give them five Bs and a D, all they’ll focus on is the D. Just tell them in plain language how they’re doing.

In their book, The Progress Principle, authors Teresa Amabile and Steven Kramer referred to a study that claimed

“Of all the events that engage people at work, the single most important – by far – is simply making progress at meaningful work.”

And how does an employee make progress at meaningful work?

Aside from a raise, the main thing employees want to know is what career path they’re on — what they have to look forward to in terms of job growth and development. So this should be key focus point.

Summing Up

Let admit the reality that when it comes to performance appraisal, no matter how noble are your intentions, you cannot eliminate subjectivity in totality. Because at the end of the day, it is a human and not a computer who does the performance assessment.

The call of the hour is to feed forward, which means managers have to guide, coach and support employees to better their last year’s performance and start believing in the power of hopes and dreams.

The Yahoo debacle is an apt case where time acts as the greatest leveller

• In 1998, Yahoo had the chance to buy Google for $1-2 Million in its nascent years! It said Google’s Page Rank isn’t worth the pennies!
• In 2002, Yahoo had the wherewithal to buy Google for $5 Billion. They said Google is overvalued!
• Now, Yahoo got sold to Verizon for a mere $4.8 Billion while Google is valued at over $500 Billion.

So the employee needs to be quizzed as to whether he/she is Google and whether he/she can prove through performance that the boss has played Yahoo.