It seems like the key players in the performance appraisal process are not getting their needs met. (a) Employees want to feel that the organization is vested in their growth and well-being, but are not getting the developmental support; (b) managers are uncomfortable or ineffective in distinguishing performance, and (c) organizations are unable to meaningfully distinguish performance through their rewards system. Do you see these as the underlying issues leading to concerns with the appraisal process?
JS: I don't know anybody who likes the rank and yank process. Here's what happens when you tell people "you have to have someone at the bottom category at the end of the year and we will probably move that person out of the business." They deliberately keep the weak performers around until the end of the appraisal period, so they have somebody to put in that box. What they ought to do is move the person out of business much earlier. Rank and yank encourages a lot of game playing and creates a lot of dysfunction.
SSB: Given the inherent problems with the rating process, are we ignoring human tendencies that make such ratings flawed? Studies show that we humans are not perfect, rational decision-makers and our decisions tend to be influenced by all kinds of biases. Are we asking managers to do something that they are not humanly capable of doing?
High performing organizations realize that the key thing is realizing what's happening day in and day out. It's the informal conversations and on-going feedback that's important. We know when you recognize people for doing good work they do more of it.
Studies show that when we set challenging goals and people accept those goals, and we give them feedback along the way, and we praise them when they attain those goals- those things engage people, and we get higher levels of performance. These are the things we should be focusing on. These are very well established psychological principles that have been around for a very long time.
1. Focus on performance management and not performance appraisal.
2. Make it an on-going process and not an annual event.
3. Use annual ratings only if you have a competitive, reward-based culture.
4. Use multiple raters and objective data to increase the accuracy of the annual ratings. However, don't expect them to be perfect.
5. Set goals that employees accept and provide on-going feedback.
6. Recognize and praise good performance and do it often.
7. Focus on improving trust and perceived justice between employees, their managers, and the organization.