Unpacking the Appraisal Process

Performance Appraisals - Yes or No?

Performance appraisals have been in use in business for years to analyse, evaluate and compare employee performance. Ever since they were introduced there have been concerns about the effectiveness of the annual appraisal and how the information is used.

Throughout my career I have seen the appraisal process re-designed, touted as ‘the best thing for business’ and vilified as ‘demotivating and devisive’. The main criticism is the fact (and it is a fact) that an appraisal is subjective -  but the meaning of the word appraise is ‘to examine someone or something in order to judge their qualities, success, or needs’ and to judge is ‘to form, give, or have as an opinion, or to decide about something or someone, especially after thinking carefully’.

So the original concept of the appraisal process was to allow someone - usually the manager - to judge another individual - the employee - in order to make decisions about them. It is these decisions that are at the root of the issue!

Employers are known to use the data for a variety of reasons: to allocate pay reviews, offer promotions and to weed out under-performing employees. If the data is inaccurate or biased in any way these decisions can cause long term problems for the individual and the business.

Employees are concerned about managerial bias during the appraisal process; using appraisal reports to record personal judgements and negative criticism about staff and that there is little opportunity for the individual to respond and influence what goes ‘on the record’.

There have always been two potential reasons to implement the performance appraisal:

  1. for administration; to inform decisions relating to pay, promotion and dismissal; and
  2. for development; to guide learning and development, motivate and improve performance.

In practice, most organisations expect appraisals to achieve both but “do these very different purposes pull people in different directions?” (CIPD)

There has been, in certain circles, a drive to do away with the performance appraisal process.

The question then becomes what will replace them and whether they should even be removed at all?

The appraisal process

Before I start analysing the pros and cons of the performance appraisal I thought I would give a quick summary of the terms used around this topic to help the new employee (courtesy of the CIPD).

  • Performance management: the activity and set of processes that aim to maintain and improve employee performance in line with an organisation's objectives.
  • Performance appraisal: is part of performance management and is typically a process in which quantitative scores based on preset criteria are assigned and shared with the employee being evaluated. In many companies the term relates specifically to the meeting(s) held between the individual and their manager.
  • Performance related pay: where levels of pay are linked to individual, team and organisational performance.

A brief history of performance management

Let’s go back to basics. Why were performance appraisals introduced in the first place?

According to my research some time in the 1900s employers noticed the correlation between worker satisfaction and improved work productivity an, in 1911, performance appraisal pioneer Frederick Winslow Taylor published two books: The Principles of Scientific Management and Shop Management - pioneering work in the areas of identifying, improving and, most crucially, modifying the flow of employee tasks and expectations.

Then, in the 1920s, Elton Mayo (the founder of Human Resources as we know it) decided to measure the relationship between productivity and the work environment. In the 1940s his work helped to change the way employees were treated encouraging managers to develop as leaders instead of taskmasters.

By the 1950’s, in the industrial world at least, the performance appraisal was established as the way to assess and reward employees for good work; in the 1960’s ‘pay for performance’ was introduced and in the 1970s the term “performance management” came into the business lexicon (coined by Aubrey Daniels).

By the 1980s ‘management by objectives’ had taken over and the process of assessing performance had become more and more complicated so that by the 1990s only 5% of companies (Society for Human Resource Management) were very satisfied with their performance review process.

In the 2000s, performance management was moved online in the hope of making the process easier to manage however this created its own set of problems.

In recent years some companies have decided to do away with the annual performance appraisal all together realising that the employee concerns had some merit. This was strengthened by the fact that the process is seen by many as tedious and time consuming. A typical process requires staff and managers to complete an extensive amount of paperwork, or on-line reports, for every direct report. This is then reviewed by senior managers and / or HR personnel for compliance and to try and eliminate bias.

So, for a company with employees in the hundreds of thousands globally, it is reasonable to expect them to review and change the way they assess and manage their staff.

However, it is often the process that is reviewed and updated - not its purpose.

As you can see from this very brief summary it took less than 100 years to move the emphasis from measuring employee satisfaction (as a way of encouraging productivity) to employee performance (in order to measure their productivity)!!

This is one of the primary reason that performance management, and the appraisal process, does not work today. The other reason is that of ‘fairness’. According to a CIPD report* ’perceived fairness is a prerequisite for effective appraisal’. * available to CIPD members.

To measure or not?

One of the biggest complaints that I hear about any performance process is the aspect of measurement. Performance can be assessed in many ways. If the job has clear deliverables then objective metrics can be used however, this is often accompanied by the more subjective views of managers and colleagues.

Employees typically view the practice as arbitrary, not a reflection of actual performance and unfair. For example, a randomised controlled trial by Schleicher et al (2009) focused on appraisals used for administrative purposes (for example, to set pay). The study showed that applying ratings according to a forced distribution substantially lowered the perceived fairness.

Where things get messy is when the process tries to measure employees’ behaviours and attitudes against the organisational values. There is plenty of evidence to show that bias in the workplace is alive and well.

The first change recommended by the CIPD report was an end to forced ranking – or guided distributions – in rating people’s performance. The second was to introduce additional levels of performance (e.g. 5 levels) which, being more realistic and achievable, is more conducive to increasing performance.

What I find interesting from working with young people that are new to the workplace is the difficulty they find in shifting from an academic environment (school, college or university) where every piece of work is assessed and graded to the working environment where feedback and assessment is not as frequent or clear.

This seems to conflict with the business research that employees find the appraisal process unfair and that measurement within the process is considered ineffective and biased. Being told that your work (or essay) is worth 75% is much clearer than being told “good work”! I am not able to provide an answer to this conundrum but strongly believe that feedback needs to be unambiguous in order for employees to improve. Every employee needs to know what “good” means or how to improve to the next level (however it is rated).

Improving or preventing communication?

As I mentioned in the introduction, instead of fostering good relations between the management and the employees, performance appraisals are often accused of driving a wedge between staff and have been cited as a major reason for limiting communication between employees and the management.

Managers may use the performance reports as a way to avoid difficult conversations. So, rather than give feedback when it is needed they wait until they can enter it into the appraisal form. This has a knock on effect. If an employee is doing well they may be disappointed when good work is not recognised. And of they are making mistakes they will not be able to improve without knowing what they are doing wrong. A badly managed appraisal can also inflate an existing issue causing more problems for the relationship.

Many organisation are replacing annual reports with more regular feedback meetings e.g. after each completed assignment or project. This approach is expected to improve communication and staff performance. Whilst creating a platform for managers and employees to talk on a more regular basis sounds positive it does not necessarily solve all communication issues. Managers need to know how to communicate effectively with their employees. More importantly, they must be able to hold difficult conversations and not avoid them.

And this new approach does not necessarily convince employees that they are being assessed or rewarded fairly. Employees, more than anything, like being recognised for their hard work and to know when they need to improve. If the management does not do this and continue to hand out reports (just more frequently!) then things will not change.

What next for the appraisal?

Not all companies have a problem with their performance appraisals. Some have actually grown more substantially with the use of this process compared to those who manage without them. Employee motivation has also been shown to improve with the knowledge that there is an annual appraisal that will determine the chances of getting a promotion or increased pay.

The ideology behind performance appraisals is a solid one that has become tainted by poor application and a few negative factors. If organisations were to improve and manage the negative issues affecting the process there would be an improvement in their efficiency.

The truth is that managed well performance appraisals can be beneficial. By developing a more effective method of delivering feedback, with an emphasis on improving communication between the employees and management, then there would no doubt be an improvement in employee and company performance.

I think there is still more research needed to address these issues. Until then the question still remains: should they should be abandoned or should they be improved?