The Folly of Performance Appraisal


“We need to discuss your performance.”

There are few phrases that cast more fear in the hearts of employees.

I was talking with a client last week about managing change for their implementation of performance management technology.   After a quick technical chat about scope, the vendor, the timetable, resources and current tools and process, I asked the obvious question, “What are the larger objectives you are hoping to achieve with this implementation?”

I expected her to say something about improving process efficiency or ease of data entry or access to data.  I also wouldn’t have been surprised if she had said that her HR function wanted to increase the number of managers completing appraisals on time.

Instead, she said, “Our CEO wants to create a high performance culture and we think that a better performance appraisal process and the right tool to deliver it will get us there.”  Their new and “improved” system included a 10-point scale (up from 5), a new universal competency model and the addition of an evaluation for how employees exhibited company values.

Pretty snazzy, but . . .

This is the moment where I take a deep breath and remind myself that being a change management consultant often requires detached responsibility*.

It’s amazing to me that 45 years after the Harvard Business Review published “Split Roles in Performance Appraisal” (Myer, Kay, & French), we still believe performance appraisal works.  The study, conducted at GE, found that the company’s performance management system not only didn’t work, it produced results that were the opposite of what was intended.  The researchers found:

  • Criticism has a negative effect on achievement of goals
  • Praise has little effect one way or the other
  • Performance improves most when specific goals are established
  • Defensiveness resulting from critical appraisal produces inferior performance
  • Coaching should be a day-to-day, not a once-a-year, activity
  • Mutual goal setting, not criticism, improves performance
  • Participation by the employee in the goal-setting procedure helps produce favorable results
  • Performance appraisal “interviews” should not be conducted with salary or promotion in the balance.

Countless other scientific studies conclude the same thing.  And more powerfully, research conducted with brain scanning technologies such as SPECT (single photon emission computed tomography) have shown us these result are directly connected to the way the brain works.

Yet, we still insist on conventional approaches to performance appraisal.  The technology and evaluation frameworks may provide more sophisticated window dressing, but the underlying process remains flawed and the results are questionable.

So, what works?  What generates higher performance?

Two things.

First, intrinsic motivation.  High performance comes when people love what they do.  Some of the most dedicated employees on the planet work for free.  They are called volunteers.  And they work countless hours for organizations that give them a sense of purpose.  They don’t care if they get raises, bonuses or even praise.  They volunteer because their work has meaning to them and because they feel like they are making a contribution.

We all know people who approach their day jobs with the same passion.  They are engaged, plugged in and having fun.  There’s no need to manage their performance.  They are too busy managing it themselves.

Second, goals.  High performance also is achieved with goals.  These aren’t the goals that are set once per year and forgotten about until it’s time for the annual review.  These are goals that are set, reviewed and tweaked every day.  Myer and company called this WP&R, or Work Planning and Review.  WP&R discussions between an employee and manager are an ongoing process built on a foundation of collaborative problem solving.  No judgment.  No rating scale.  Just the continuous process of improving.

That’s what passionate people living their purpose do.  They strive to be better.

Amazing, isn’t it?  Getting high performance from employees is not about some Frederick Tayloresque command and control system of alpha dominance.  It is about engaging employees and tapping passions.  It’s not about incenting behavior with rewards and punishments or demanding compliance to some generic norm.  It is about collaboration.

High performance happens when you gather people who enjoy what they do and who have fun figuring out how they can do it better together.

My suggestion is that we set aside the folly of formal appraisal as well as any notion of a manager being able to improve performance.  Instead, let’s focus on making sure our managers know how to listen to employees, understand and sometimes draw out their passions, and create collaborative cultures working toward a purpose greater than next quarter’s earnings.

  • Detached responsibility—the ability to educate, resolve conflict, or manage change by taking responsibility for what is within our control and letting go of the need to resolve issues out of our range of immediate and direct influence.  For more on detached responsibility and the other Principles of Interaction read, Listening to Conflict:  Finding Constructive Solutions to Workplace Disputes.


6 thoughts on “The Folly of Performance Appraisal

  1. Erik- This is really great. I just finished delivering 20+ annual performance reviews. I found your points so right on and applicable to what I was seeing in my place. Trust me in the banking world especially today, loving what you do and your concept of daily management of goals sort of dynamically has been key to keeping good people from leaving to competition.

  2. 20+ annual performance reviews! That’s a hefty work load, especially since it sounds like you made each one personal and meaningful. With the economic, political and financial challenges affecting banking over the last 18 months, you must be a strong leader to keep your employees engaged and connected. Thanks for sharing your thoughts!

  3. Erik –

    Great post. We all know performance appraisal is a dreaded process which is largely ineffective. And efforts to use the latest technology results in highly efficient, automated processes which still don’t work (but are faster and easier to use!).

    If I may, a little story. Several years ago, one of my colleagues was tasked with designing a new performance appraisal system for one of the world’s largest and most diverse employers. He interviewed about 1,500 staff members, at all levels of the organization, across the globe.

    During the interview, he asked a simple question to each staff member: “Do you like the performance appraisal system?” Universally, the answer was no. He then asked a follow-up question: “Do you know who the good and bad performers are?” The answer was a resounding YES!

    While the range of replies varied, and the sentiment was expressed in many different ways depending on country, level and job role, when the data was analyzed, there was an amazing consistency in the replies. It seems that good performers are those for which the following four questions can be answered yes:

    1) Do you have good ideas?
    2) Do you listen and adapt those ideas to your customers’ needs?
    3) Do you work well with other members of the team?
    4) Can you be counted on to deliver results?

    Think about it. If the answers to those questions were all yes for someone in your company, would that individual be considered a good performer?

    We took these insights and built a performance appraisal system which is anchored by these four questions. In a pilot test across 80 countries, using 360 input from employees, managers, peers and outside customers, the results after a 6 week period were compelling:

    – 85% compliance with the performance appraisal process (as opposed to under 25% for the former system)
    – A nearly perfect bell curve, without the need to calibrate the results
    – The ability to view results by workgroup, job level, country, self, manager, peers and numerous other factors
    – Successful outreach to both internal and external customers to include their perspectives on performance of the organization’s staff
    – Finally (and this is the most amazing result) – a request the following year, from the union leadership, to please use the system again.

    Employees and managers liked the approach and found the results to be useful in differentiating performance, helpful in providing constructive feedback, and a strong base for rich performance discussions between managers and their subordinates.


    1. Thanks for your thoughts and the example, Warren. What you described seems like a practical and thorough option for organizations wishing to implement some form of formal annual appraisal. 360 tools at least let employees know whether they are in the right environment because if everyone thinks you aren’t performing, then you aren’t. The feedback is clear.

      With the tool you described, the organization also has a defensible argument for getting rid of the “poor performers,” the bell curve for distributing pay increases and bonuses, and a tool “liked” enough by all to encourage compliance.

      But thinking about the science I mentioned in the post, I wonder . . . did it improve performance? I love the fact that it created rich discussions, but did it create ongoing discussions? Assuming, as the research tells us, that feedback doesn’t improve performance, did it tap the intrinsic motivation and passion required to achieve collaboratively created performance goals?

      If so, then you have a powerful tool!

      1. Erik –

        Unfortunately, the simple answer is I don’t know. The pilot was viewed as very successful, but for political reasons (mainly) the system was not utilized after that. So we will never know about the true impact in the pilot organization.

        We make the system available commercially now, as Birches Group Community™. Hopefully we will be able to assess the effectiveness in a few years.


      2. That’s often the challenge, sadly. It points back to what you said: “performance appraisal” is viewed as a “dreaded process which is largely ineffective.” It may well be that any system is viewed by managers as an administrative burden, and speaks to their solid gut-level instincts about its ultimate utility, or lack thereof.

        The traditional view within HR circles is that some formal recordkeeping is needed to legally defend employment decisions. HR also knows from experience that if they don’t put a formal process in place that there are some managers who would never speak to employees, let alone work with them to achieve higher levels of performance.

        Maybe we would get better organizational results if we tried to solve those two problems, rather than continuing to invest time and resources into perpetuating a tool that . . . well . . . is ineffective.

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