Appraising Appraisals

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Appraisal. The very word seems to send shivers down so many spines. Quite apart from the fact that I hate the word (I prefer the term ‘performance development review’), I’ve never understood why so many people so dislike the annual appraisal. It’s anticipated with all the relish of a visit to the dentist for some root canal work, carried out by Mister Magoo, using only a set of rusty old cocktail sticks.

I say ‘annual’, though not everyone follows the old pattern of an annual review any more. But these are the meetings that take place between an employee and his or her supervisor to review work progress and assess performance against targets before looking ahead and mapping out a work programme and setting fresh objectives. Or at least that’s the theory. That they are so negatively anticipated is largely due to poor implementation and process.

The principle of the appraisal (although I dislike the word, I’ll be using it throughout) had remained unchanged for many years. But by the turn of the Millennium there were companies railing against it and in 2002 an American pharmaceutical company – Colorcon – announced that it was actually ditching it completely. HR leaders were appalled. No surprise there, you might say, and you’d be right. But so were most business leaders. Abandon the appraisal? It was heretical. How on earth would businesses assess progress without the appraisal? It flew against the advice of employment lawyers.

Colorcon argued that instant feedback, set against an employee’s targets, was the way to go, and decided to offer small weekly bonuses and rewards for people they felt were doing good things.  And within two decades it’s estimated that over a quarter of companies in America – including many of the big players such as Microsoft, Adobe, Dell, Accenture and Gap – have gone down a similar path.

So why ditch a model that’s been around for years, a model considered ‘the norm’ for so long?  Well, we’re told it’s very time-consuming. Those who have moved away from it say the process generated mountains of paper, wasted line managers’ time, restricted challenge and creativity, and served no purpose. I’m sceptical about some of those claims. Whatever process replaces the annual review will require line managers’ time – potentially more of it – and if you want the best from your workers surely they deserve a chunk of your time. If an appraisal is done properly then challenge should be part and parcel of the process. Both ways. If there’s a lack of creativity that may have more to do with the intellectual incapacity of the individual conducting the appraisal than the appraisal process itself. Are they asking the right questions, exploring the right areas? As to generating mountains of paper, why does it need to? To me that says more about the processes of the companies making those claims than it does about anything else.

There are complaints about an over-emphasis on targets, goals, objectives, key performance indicators (KPIs): call them what you will. And on this point I agree. Some businesses don’t just set targets: they’re completely obsessed with them. There are similar grouses that there is too heavy an emphasis on financial rewards and punishments. Another fair point, which we also explore in more detail further on. But the former may well be because the company is wrapping its workers in red tape and suffocating them with targets, many of them potentially meaningless and nothing remotely to do with the bottom line. (And while we’re at it, is there a more soul-destroying answer than ‘…because we’ve always done it this way?’ I don’t think so.) Slim the KPIs right down. Pick out the meaningful ones. Negotiate targets with the employee. Then hold regular conversations with them about what more you can be doing to help and support them. Don’t just leave it twelve months, as many businesses still do. That just smacks of getting the annual meeting out of the way, rather than investing in the actual development of the individual concerned. If there are concerns about the emphasis being too much on financial rewards, move the reviews so that they’re well away from any company pay reviews. Or even take salary and bonus out of the conversation. The appraisal has become a tick box exercise for too many bosses. But those who moan about it seem very reluctant to do anything to change it. And coming back to the old chestnut that both employer and employee despise the whole thing, yes, OK, but I’d argue that this is because of the way in which it is done. So change it, It’s not difficult. Stop moaning about it and address the reasons why people despise them. More often than not you’ll find you can do something about it.

In addition to the impenetrable world of KPIs, scores (and, worse, forced rankings), one of my main beefs is that the appraisal is too often focused on holding people accountable for their past behaviour at the expense of working to improve their performance for the period ahead. Another bugbear is how many supervisors seem to want to zero in, unerringly Exocet-like, on an employee’s weaknesses, their failures, their mistakes, instead of encouraging them to do more of what they do well. Again, this is more a fault of the manager rather than with the system, but if that is the case, and appraisals are only taking place annually, then it’s little wonder that employees are approaching the whole thing with dread.

As much as the review is about the worker, there are huge lessons to be learned by the people doing the reviewing. I help a few companies to facilitate their reviews (biannual in two cases, annual in a third) and I am acutely aware of the need to be coaching the line managers, offering advice beforehand and feedback afterwards. It’s not uncommon for supervisors to forget that it’s the worker’s turn to be in the spotlight, not theirs, and that they’d be better advised using their ears rather than their mouths. MDs and CEOs who fire arrows at the appraisal process sometimes overlook the fact that its failure may be a consequence of poor implementation – the line managers need to be up to scratch as well.

When the job market favours the worker, the focus is on which employees to keep, which to reward, which to let go, and from that perspective the traditional appraisal (with its emphasis on individual accountability) works well. But when talent is in shorter supply, developing people becomes the greater priority for business. After the Coronavirus pandemic, we will probably see a shift from the latter to the former and it will be interesting to see the extent to which the way we review performance has been affected.

The classic appraisal tug-of-war has been one between accountability and development. The rise of “HR” is a relatively recent phenomenon. So how did we get here? A brief history lesson… It was in the 1940s that American companies started to use appraisals to document workers’ performance and allocate rewards. The social psychologist Douglas McGregor argued in the 1950s for engaging employees in assessments and goal-setting before General Electric led a move to split appraisals into separate discussions about accountability and employee development. As inflation rose sharply in the 1970s, businesses felt the pressure to award merit pay more objectively, and so accountability again became the priority. GE, through Jack Welch, then championed forced ranking in the ‘80s so as to reward the top performers, accommodate those in the middle, and get rid of those at the bottom (which sounds very easy but is in fact fraught with risk). As organizations became flatter in the 2000s, meaning a dramatic increase in the number of direct reports each supervisor had, it became harder to invest time in developing them.

Which brings us round to the last 20 years or so. Companies have continued to ebb between appraisals based on accountability and appraisals based on development. Organizations have become more team focused in recent years, something which doesn’t naturally lend itself to a spotlight being shined on individual appraisals and rewards. Given we’re about to jump off a cliff economically, available workers will far outstrip available jobs. People will be less worried about pay then they will about job security. And so employers will have the whip hand for a while. Businesses are loath to do it, but it would be refreshing for them to be putting the employee first to the extent where they are encouraging and developing them even in the knowledge that they are likely to end up moving on. The average tenure in one job is 4½ years (a stat that was pre-pandemic): let’s try to reflect that in appraisals and stop pretending workers are going to be with us until they retire. Work hard to get them to stay, of course, but the appraisal shouldn’t automatically assume that they will. Ask them questions about their broader career aims and try to contextualize those within the business. What areas are they interested in? Is there a way of accommodating them?

One element of the process I dislike is the scoring system. I’ve used these myself. It seemed a transparent way of assessing progress. But it isn’t as helpful as you’d imagine. Scores depend on the manager doing the ranking. And if someone is already very good, how do you score them and how are they supposed to improve? After a while I found them to be artificial and flawed and ended up ditching them. And I really do dislike the idea of forced ranking. Nice idea, but in my opinion without proper comparisons it is pretty difficult to establish anything other than a very arbitrary league table and a queue for employment law advice.

I’ve mentioned the fact that the experiences of workers during lockdown could well have a part to play in how appraisals are shaped in the future. With so much emphasis recently on working from home, employees have had to adapt to become more self-motivated, self-organized and self-directed. Performance has been judged far more on outcomes. Managers should have been – or at least I hope they have – communicating much more closely with their workers anyway. There should have been regular contact. How will that translate back to the traditional environment? Will we have a traditional environment again? How will businesses adapt?

It’s estimated that 12% of US companies have dropped annual reviews altogether. More of the larger companies in the UK are looking to follow suit.  The three main reasons cited have been: a desire to focus more on people development, arguably better suited to regular, more informal check-ins; a desire for greater agility; and the growing importance of teamwork, which militates against scores and particularly forced rankings.

But that still means close to 90% are either comfortable with the annual appraisal or not sufficiently minded to make any change. The argument, though, should be that the regular review needs to closely follows the natural cycle of work. Conversations between managers and employees occur when projects end, milestones are reached, challenges pop up, and so forth – allowing people to solve problems as they go whilst also developing skills for the future. At most companies, managers take the lead in setting short-term goals, and employees drive career conversations throughout the year. The conversations are technically more holistic. They’re about goals and strengths, not just about past performance. That much makes a lot of sense.

But businesses should be looking at this issue on the basis of what works for them, what fits, not what the majority suggest they ought to be doing. If change is required or will benefit the company, it’s worth overhauling the performance management system. It seems, though, that many are stuck at either of the two extremities: either conforming to the annual review because that is what is generally acknowledged by the majority to be ‘the done thing’; or changing for the sake of changing. There really is no one-size-fits-all to this. Ask questions about whether your business operates with a steady and consistent workflow or is more project-based or adaptable to innovation; whether you need to develop people in order to compete, as well as reward them; or if you need tighter communication between departments. And put a system in place to fit.

The elephant in the room remains the line manager. Being blunt, if your line managers or supervisors struggle to manage, it probably matters little whether you choose to have an annual review or more regular informal conversations. The process won’t work. Your system, as is the case for almost all systems, is only as good as the people who are implementing it. So who coaches the coaches?

I am very interested in the content of the conversation. We’ve become so fixated with frameworks and processes that we’ve often neglected the conversation. It is extraordinarily difficult to have a serious, open discussion about problems while also dishing out consequences such as no reward pay. The end-of-year review is also an excuse for delaying feedback until then, at which point both supervisor and employee are likely to have forgotten what happened months earlier. Both of those constraints disappear when you take away the annual review. On the flip side, almost all companies that have dropped traditional appraisals have ended up having to invest significantly in training supervisors to talk more about development with their employees, and are checking with those supervisors to make sure that’s happening. But the quality of the conversation is so important, as is consistency of message. My involvement with clients has been on the basis of facilitating, providing a fixed reference point for the business, offering neutrality for the worker, and an ability to support both worker and supervisor. We meet formally annually, but the line managers and workers meet informally throughout the year. I provide the points on the graph and they link them up. It seems to work well, with both employer and employees happy.

Moving to an informal system requires a culture that is capable of keeping the continuous feedback going. That’s difficult to sustain if it’s not happening organically. Is your business equipped to do that? How good are your managers? How does it all knit together? For many companies it’s much easier said than done. I did my 20,000-word Masters project on performance reviews and I understand that there is no one model that outperforms every other. There are faults with any of them. Be creative. Tailor it to fit. Accept the flaws and work around them. And make sure you have managers capable of managing whatever appraisal system you have put in place. Don’t let them hide behind the process. We need to work hard if we want talent to stay with us. To me, that has to start by showing a proper interest in their development.

Arguably the greatest resistance to abandoning appraisals completely, which is something of a revolution in human resources terms, comes from HR itself. The reason is simple: many of the processes and systems that HR has built over the years revolve around performance ratings. Experts in employment law had advised organizations to standardize practices, develop objective criteria to justify every employment decision, and document all relevant facts and outcomes. Taking away appraisals completely flies in the face of that advice—and it doesn’t necessarily solve every problem that they failed to address. Workers’ performance needs managing. Surely that requires at least some degree of formality?

I’d say there are very few businesses that could manage without some form of appraisal system. And even then, probably not for too long before everything descends into a kind of office-engineered anarchy. Whether your company believes in continuous performance management or an annual appraisal, here are ten things you can do:

  • Try to place the employee’s development in the context of their career
  • Align individual and company goals – don’t set too many
  • Don’t let the conversation be all about pay; hold appraisals away from pay reviews
  • Reward good performance
  • Identify poor performers
  • Be consistent and benchmark across the company
  • Listen more – it’s about the employee
  • Challenge respectfully but encourage challenge in return
  • Use past performance to inform future development; restate goals
  • Continue to ask what support you can offer

 

And if you’re stuck, I’m happy to help!