Let’s Do Away with The Annual Performance Appraisal!

Credit: https://clipart-library.com/clipart/performance-review-clipart_13.html

Most organizations go through a fairly painful, rather useless process, in my opinion, called the annual performance appraisal. During this process, each employee receives a subjective score on various items, accompanied by a narrative intended to justify the score, which is also subjective. Typically, performance appraisal processes occur just once a year instead of incorporating frequent feedback, making them subjective and inconsistent. I don't know of many people outside the HR department who can honestly say they see any real value to the company in conducting annual performance appraisals. Let’s take a look at how the current performance appraisal process works and how a more dynamic, project management-based approach can not only replace outdated annual appraisals, but also enhance employee motivation and organizational success.

The Way the Process Typically Works Today

1.  A trigger point occurs, say the fourth quarter and all employees need an annual appraisal before the end of the year or 60 days before the employee’s anniversary date.
2. The manager looks at last year’s performance appraisal and any notes that may have been taken during the year regarding the employee's performance. Any goals listed in the prior year’s appraisal for the next year are examined.
3. The manager may optionally ask the employee to do a self-assessment of their performance.
4. The manager then takes all of this compiled information and attempts to score the employee on a number of pre-determined goals or objectives. These may relate to the employee's official job description, be general corporate goals/objectives or a combination of both.
5. The manager then attempts to craft narratives for each score to justify them. Actually, this is ideally the way it should happen. In reality, this rarely happens, or the narratives are very thin and full of platitudes or remarks too generic to be of much use.
6. The manager then sits down to meet with the employee to deliver the appraisal. Discussion ensues about the scores, how the company views the scoring, etc. Both parties typically walk away less than satisfied.
7. A merit increase may or may not be given based on the performance appraisal and the amount may or may not be reflective of the employee’s actual performance over the last year.

Current Flaws in the Current Annual Appraisal Process:

1.  It is subjective! It is really difficult to put any faith in a process that relies on largely subjective measures (both as a manager and an employee). As a result, this process largely becomes a process of box checking to meet a requirement.
2. It is done once a year.
3. Outside of meeting some sort of company or compliance requirement, what is the real goal of this process? I will take later on in this article about what I think the goals of employee “appraisals” should be and how I think those can be better achieved.
4. It ends up being a negotiation and a shuffling of scores on the part of the manager to fit into some predefined expectation (anyone heard of the bell curve?) which tends to negate what little value the process might actually have. Managers end up negotiating with employees about scores (how many times have we had to say, “I can’t give you a 5/5 on this metric, because we are told that no one actually gets that score here” or something to that effect?)
5. Scores then get reshuffled again when looked at by HR or executive management to fit some sort of budget or equity protocol.
6. Lack of consistency. As the performance goals/objectives are usually very subjective to begin with and you have many managers across the organization delivering performance appraisals, there is absolutely no way to have consistency, except by accident. I know many organizations try to analyze, stratify, and smooth scores, but, again, is that really accomplishing anything but fitting into a predetermined result (here comes that bell curve again)? Additionally, many organizations are trying to introduce SMART goals into their process (if you are not familiar with what a SMART goal is, you can go here to read up on the topic). That is a nice effort, but in my humble opinion, is just putting lipstick on a pig.

 

So, What Should We Do?

To be clear, I am not advocating for a world where we do away with employee feedback or management. Actually, far from it. A well-designed employee feedback process should actually act as a retention tool rather than just some onerous mandate thrust upon middle managers once a year.

Let’s Talk About What the Goals of the Process Should Be

1. Provide timely feedback. Feedback once a year is meaningless and doesn’t reinforce desired behaviors when they are occurring or deal with those behaviors we would prefer not to see in a timely manner. I know most good managers already have one-on-one meetings with their staff at least monthly. Why not make this a formal part of the process?
2. My background tends to skew very heavily towards project management, which I know is much different than that of many of our HR partners out there, but to make employee feedback objective and consistent, why don’t we take a project management-type approach to it where we lay out well-defined milestones, with actual deliverables and timelines and measure against that? A well-defined plan with timelines and milestones works for employee development such as training, taking on additional responsibilities or projects with defined milestones, as well as day-to-day activities. This becomes a very objective way of measuring development and performance as the manager is not responsible for assigning some arbitrary score, but measurement lies solely in evaluating the question did the employee achieve the milestone, yes or no? Achievement is judged by whether the deliverable was completed on time. Now, there can be a subjective component that measures how the milestone was achieved with coaching and mentoring around specific areas of how the employee approached and worked on the milestone. This would be delivered in the one-on-one meetings as the employee is working on the milestone, with the goal of improving the end product. We should be coaches and not managers. Our goals should be to facilitate growth in our employees. This helps accomplish that in ways that most annual performance appraisal processes do not. If you are a big fan of the SMART goal movement, you can incorporate that here, however, I think that just overly complicates things. If you follow a project management approach where you have tasks that lead up to a milestone and deliverable, you have essentially accomplished the same thing without the silly acronym. In my experience, people struggle with the SMART goal concept, and it just becomes a roadblock for them. Let’s simplify.
3. A detailed growth plan that considers where the employee wants to go with their career (short-term and long-term) and the needs of the company should be at the heart of the process. This should result in a series of actions that culminate in milestones and deliverables, with due dates. The development of this process should be a partnership between the employee and the manager and, in my opinion, driven by the employee.
4. The process should be constantly evolving. As milestones are met, new milestones should be created and agreed upon. The process should be re-evaluated and adjusted for each employee on an annual basis to make sure that it continues to be relevant and that the goals of the process are being achieved for each employee (i.e., as employees are more easily achieving milestones, new milestones should increase in difficulty to continue to challenge the employee and encourage growth).
5. The employee should be engaged and motivated and not fearful or feel dread. Again, frequent coaching geared toward helping the employee be successful and grow is what drives and motivates the employees that we all really should want to retain. If the employee is vested in the process and feels a sense of ownership, there is a much higher likelihood of success and employee growth.
6. Most annual performance appraisal processes culminate in the award of some arbitrary merit increase based on the subjectively scored performance appraisal. I think everyone would be better served by identifying merit values associated with the successful achievement of each milestone and awarding those as the milestones are achieved, not once a year. This keeps the employee engaged and motivated and brings the reward closer to the action or behavior.

We have talked about what the goals of this process should be, but what about the downsides? No system is perfect, and this process does have what I see as a small flaw around consistency. As we talked in the beginning of the article, the current process used by almost all organizations lacks consistency. There is a potential for some inconsistency in this process, not around scoring as in the current process, but just around how to measure the relative difficulty of the plan that you are measuring the employee on. Since each employee’s plan is different, how to ensure that each employee is being challenged in an equitable way can be difficult to assess.

In considering the benefits of moving to this kind of performance management process, I think that the benefits far outweigh the slight downside of having to determine how to measure plan difficulty, equity, and consistency. The mitigation strategy for this is just good old-fashioned management and knowing what your employees are doing and whether they have enough to fill their plates, or their plates are too full. That should be a critical part of the one-on-one process anyway and, in my opinion, should happen at least monthly. Under the proposed process, we should shift our emphasis when we develop our managers from the mere paperwork of performance management, to thinking about planning and having conversations with the employee that are not only informative for both parties but drive growth. Developing how managers do check-ins and one-on-one meetings with their employees to drive the most value and engagement is something that can deliver incredible results down the road.