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Why performance appraisals fail: A root-cause analysis and alternative

As an HR professional, I know the value of the performance appraisal. However, I also know that, if done poorly, they can have the opposite effect on an organization.

Performance appraisals have typically been driven by human resources. When performance appraisals are done poorly by management, it reflects on HR. Traditionally, management has sat their employees down one on one to go over the year in review, set the upcoming year’s goals and expectations. For years, the process has worked for few, but because of the time involved, it’s not done with any degree of success.

Why should we do performance appraisals?

The purpose of performance appraisals is to provide individual feedback relative to the organizational goals. They should measure an individual’s contributions in terms of quality, quantity, timeliness, and costliness.

Why have organizations and upper management lost interest in them? Why do experts and management agree the performance appraisal/performance management effort is broken and is a waste of time?

HR departments drive performance appraisals, so they take the burden of their failure. There are many reasons why performance appraisals fail. Some appraisers have no idea what to measure. In other words, they can’t tie an individual’s performance to the company’s strategic plan or business plan. Many appraisers focus only on recent events rather than evaluating the entire year when reviewing the employee’s performance. Many appraisers fail to follow up periodically on the goals they have given their employee to achieve — missing opportunities to correct problems or review progress during the year.

Why don’t appraisers do a better job?

Most appraisers have too many employees to evaluate. More companies’ management structures are getting flatter, creating more work and more appraisals for each manager. Appraisers complain of the reviews taking too much time away from day-to-day management activities. Employees being appraised don’t always agree with their supervisor’s assessment, leading to unwanted friction and attrition. Upper management recognizes when performance appraisals are done poorly because of inconsistencies, obvious favoritism, and dual standards by appraisers.

Corrective action

Why not measure the department’s actual performance against the stated goals for the period being evaluated; and do away with individual appraisals? Where did the department’s performance stand against its goal? No individual performance appraisals, just organizational or department appraisals.

No more time agonizing over ratings; this takes all the subjectiveness out of the ratings picture. Each department’s rating is a reflection of their contribution to the organization’s bottom line. Each department’s employees, supervisors, and managers share the success or failure of their department’s performance. This allows for appraisal consistencies within a department that reflect that department’s performance.

Performance appraisals are important because they are supposed to help defend an employer against accusations of discrimination or retaliation. Organizational appraisals would create more consistency in the peer relationship between appraisals and rewards. They would end the practice of favoritism and ratings unfairness, which is so often at the heart of workforce disengagement.

Upper management, in accordance with the organizational goals and strategic business objectives, would determine performance increases for each department. They would be based on a pre-determined reward for “meeting,” “exceeding” or “failing” to achieve their department’s revenue or bottom-line goal. In other words, the appraisal process would be used to make business decisions for the organization’s future and the the employee.

Improving “team” dynamics and collaboration is another positive affect of organizational appraisals. The success of a department’s appraisal will have a direct result on all employees in that group. As in team sports, the sum of the parts are greater than any individual. Coaching and training would have to be more prevalent to get the desired results.

Preventative action

Instead of meeting with individuals to go over performance goals, the meeting is held with teams or departments, so everyone hears the same goals their department is expected to achieve. Concurrently, the same meeting can be used to go over the results at the end of the rating period to share the result of their work and how they will be rewarded. This would save management a lot of time previously spent on individual discussions and improve overall communication.

Increasing productivity of management is another effect of this approach, allowing more time to solving problems and training their subordinates, and less time preparing written evaluations, less time meeting, and less time complaining. This one meeting creates another opportunity to communicate the company’s mission and vision. It is an opportunity to outline the company’s strategic goals and explain how each employee’s contribution is an integral part in achieving those goals.

Follow-up quarterly meetings to review department goals against actual results with the team, replaces individual meetings and improves department communications while saving management time and keeping employees engaged and accountable.

Eliminating the time-consuming appraisal process can improve communications and performance. It is a way to create a positive workplace environment. Developing trust, respect and loyalty are the secondary benefits of this approach.

Just because you always have done performance appraisals for each employee doesn’t mean you have to continue doing them. Bottom line: The organization’s actual performance will more accurately reflect employee performance.

Michael Palucki is human resources director for TEAM Technologies in Albuquerque, N.M. He is an HR professional with more than 20 years’ experience working in every facet of human resources, including compensation, recruiting, employee relations and benefits.

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