Still looking for information about performance appraisals:

1. Do they improve performance by employees?
2. Do they work for managers?
3. How do they affect a company’s bottom line?

I’ve found a lot of opinions and impressions concerning questions 1 and 2 above, but no hard evidence, one way or the other, related to question 3.

Right now, I’m reading “Abolishing Performance Appraisals: Why they backfire and what to do instead” by Tom Coens and Mary Jenkins (Berrett-Koehler Publishers, 2000). Here’s their take:

“In the interest of honesty at the outset, let us say it is our fervent belief that appraisal does not work. It impedes the reception of feedback, and there is no solid evidence that it motivates people or leads to meaningful improvement. Due to it’s inherent design flaws, appraisal produces distorted and unreliable data about the contribution of employees. Consequently, the resulting documentation is not useful for staffing decisions and often does not hold up in court. Too often, appraisal destroys human spirit and, in the span of a 30-minute meeting, can transform a vibrant, highly committed employee into a demoralized, indifferent wallflower who reads the want ads on the weekend.

“Our harsh censure of appraisal rests on a solid foundation. Academia, industry and professional associations have intensely scrutinized appraisal for more than 50 years now, producing hundreds of studies, surveys and articles. Despite a strong bias by many researchers who favor appraisal or imply that appraisal is indispensable, these studies and surveys offer scant evidence of appraisal’s success. A survey by the Society of Human Resources Management found that more than 90% of appraisal systems were not successful. Another survey by Development Dimensions Incorporated, a leading H.R. consulting firm, found that most employees expressed ‘overwhelming’ dissatisfaction with their performance management systems. In an Industry Week survey, only 18% of respondents said their performance reviews were effective, with 48% of respondents calling them ‘second-guessing sessions.’ A 1997 survey by Aon Consulting and the Society of Human Resources Management found that a mere 5% of H.R. professionals polled reported that they were ‘very satisfied’ with their performance management systems.” (pp.17-18)

Coens and Jenkins provide a lot of information about why appraisal fails, but there’s still a problem. Performance appraisal systems will continue to be used by most companies unless solid evidence of problems are presented and a clear alternative is available. The authors only recommend processes and criteria companies should use to design alternative systems (so far, still reading…).

Maybe that’s the best answer, but it doesn’t really get the “abolish performance appraisal” ball rolling, does it?

Authenticity: will we fake it? by Philip Whiteley in Management Issues features an interesting discussion of why hard (money, structure, systems) conquers soft (people, personality, feelings) when it comes to business decisions:

It is so much a part of the air that we breathe that it is unnoticeable; this assumption that there must be some universal, mechanistic rules determining the outcomes of complex human societies. So organisations will copy the matrix management system of another company; outsource according to the same template; install the same total quality processes and, hey presto – the outcomes are completely different.

It is very, very difficult to shake this assumption from the mindset of most managers. The problem stems in part from the fact that companies deal in money; money has to be accounted for, and hence we produce lots of numbers. It is therefore tempting to borrow from the world of engineering and apply numerical formulae as though we were dealing with objects.

And then there’s this:

Being generally nice people, human relations/human resources practitioners don’t like telling MBA lecturers, senior executives and investment bankers that their ideology is no more advanced or scientific than alchemy or witchcraft.

One wonders if, collectively, they will ever be bold enough to say, as the little child in the Hans Christian Andersen fable did, that ‘The emperor has got no clothes’.

Of course, executives like Jack Welch and Larry Bossidy, and concepts like the Balanced Scorecard, emphasize combining the hard and soft in running a business.