You Were Exceptional When You Came In

“You Were Exceptional When You Came In, But Now, Relative To Your Peers You’re Only Average”

Changes In Performance Appraisal Systems

A very interesting trend over the past few years in the policy and practice of Human Resource Management has been the changes in the area of performance management. This involves a growing shift in their form and type.

Movement away from forced distribution

In short, there has been some movement away from the once fashionable and prevalent ‘Neutron-Jack’ era GE-type forced distribution, ‘rank and yank’ performance appraisal systems (Williams, 2015). These sorts of appraisals have increasingly come to be seen for what they always were: not only naïve but costly and counter-productive.

Yet, despite this, many surveys continued to show very large numbers of employees, managers and HR professionals disillusioned with the forced distribution systems.

One type of performance appraisal, such as ‘stack ranking’ systems, became increasingly commonplace, not least as a counter to weaknesses in other systems which allowed managers to give everyone the same ‘neutral’ ratings (ie not top or bottom) – partly as this reduced the need to spend even more time and work explaining the rating.

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Yet, despite this, many surveys continued to show very large numbers of employees, managers and HR professionals disillusioned with the forced distribution systems. This was because they found them a nuisance and not value-adding to the organisation, interfering with productivity and not even relevant to their jobs (Hughen, 2014).

Changes afoot

Now, various surveys have begun to find some change in the area.

Some have found 6 – 10 percent of Fortune 500 and 12 percent of Fortune 1000 firms (up from 4 percent in 2012) have abandoned such systems (Cunningham; 2015; Cunningham and McGregor, 2015; Hughen, 2015).

However, this is far more than simply a numbers game as these examples involve high profile ‘blue chip companies, ranging from Microsoft to Adobe, Accenture, Deloitte, Expedia, Gap, Motorola and even former cheer-leader GE!

Why is this happening?

I list the systemic problems and context changes in six broad reasons in twin groups: problems and changes.

It has been calculated that an average manager spends 200 hours/year on performance review-related activities that along with technology costs equals to US$35m/year for a company of 10,000 employees.

A. Systemic Problems

1. Costs

Time, money and transaction and opportunity costs.

Many surveys show this, such as managers spending an average of 210 hours/year on appraisal-related activities. Adobe spends 80,000 hours/year (Brustein, 2013; Nabaum, 2014) and Deloitte spends 2m hours/year on this.

It has been calculated that an average manager spends 200 hours/year on performance review-related activities that along with technology costs equals to US$35m/year for a company of 10,000 employees (Cunningham, 2015; Cunningham and McGregor, 2015).

2. Subjective

Not objective, but biased and also inconsistently used. Indeed, scores are often not an accurate reflection of actual performance. Rather, they are influenced by the all too common problems of rater bias.

3. Results

Not only did the appraisal system not add-value but were counter-productive, even removing talented people (ie GE’s ‘bottom’ 10 percent).

Why is this?

This is partly because of the false assumptions made by many.

First, there may not be a ‘Bell Curve’ distribution of talent but a ‘Long Tail’ distribution (or ‘Power Law’) ie there are a small number of hyper-high performers, a large number of good performers and just a small number of poor performers (Rock et al, 2014).

Second, neurological – the way the brain functions and works in several ways (Ibid.). First, many have an incorrect view of human growth and learning, based on ‘fixed mind-set’ (born talented or not) versus ‘growth mind-set’ (we can learn, grow and improve). Second, many do not recognise that receiving numerical rankings automatically generates ‘brain hi-jack’ and the ‘flight or fight’ response that impairs good judgement and is ill-suited to thoughtful, reflective discussion that allows people to learn from performance reviews (Ibid.).

So, much performance appraisal triggers disengagement, constricts openness and reduces knowledge-sharing, risk taking and innovation. These combine with changes in the environment and context.

B. Context Changes

1. Expectancy

People tend to give feedback in many areas far more nowadays. In turn, staff expect greater feedback and more speedily.

2. Work

Work itself is more knowledge/project/team-based and collaborative. This mitigates against systems that are too simple and individual focused.

3. Technology

Developments in technology increasingly allow easies ‘real time’ data collection, etc. This cuts against one of the arguments that appraisals are costly in time.

Interesting, this needs to fit not only corporate culture but also the business culture, such as the difference between the US-UK (high individualism) versus Japan-Korea (high collectivism).

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References

Brustein, J. (2013) ‘Microsoft kills its hated stack rankings, does anyone do employee reviews right?’, Bloomberg Business, 13 Nov
Cunningham, L. (2015) ‘In big move, Accenture will get rid of annual performance reviews and rankings’, Washington Post, 21 July
Cunningham, L. & McGregor, J. (2015) ‘Why big business is falling out of love with the annual performance review’, Washington Post, 17 Aug
Hughen, D. (2015) ‘Is it time to put the performance review on a PIP?’, Austin HR, 7 April
Mitchell, L (2014) ‘Are appraisals losing impact?’, HR Magazine, 25 Nov
Nabaum, A., Barry, L., Garr, S. & Liakopoulos, A. (2014) ‘Performance management is broken’, Deloitte University Press, 4 March
Rock, D., Davis, J. & Jones, B. (2014) ‘Kill your performance ratings’, Strategy & Business, 8 Aug
Williams, R (2014) ‘Why performance appraisals need to be scrapped’, Financial Post, 22 Feb.

Student image courtesy Alexander [email protected]





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