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September 18, 2006

Do Appraisals Work?

Published
on September 18, 2006
in Performance Management
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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”:http://www.stratventures.com/shorty/74734/” 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?

September 11, 2006

Survey results demonstrate performance evaluations need improvement

Published
on September 11, 2006
in Performance Management
. Comments Tags: , , .

More WorkUSA 2004 survey findings from Watson Wyatt (based on a survey of 1,191 US workers from a broad cross-section of industries):

  • Approximately 90 percent of surveyed employees participate in a performance management program.
  • Only 30 percent of employees believe the program helps them improve their performance.
  • Less than 40 percent say the system establishes clear performance goals or generates honest feedback.
  • Only 39 percent of employees see the connection between their day-to-day work and company goals.
  • Only 54 percent of workers think their companies set high performance standards.
  • Only 44 percent feel that people are held accountable for their performance.
  • 20 percent say their companies help poorly performing employees improve.
  • 43 percent of employees feel they don’t get enough guidance to improve their performance.
  • Only 38 percent of employees say that their company uses technology to streamline the performance management process.

These numbers are subject to interpretation. For example, while Watson Wyatt reports 30 percent believe their company’s performance evaluation process helps them improve performance, only five percent strongly agree with that statement. Put another way, 95 percent of employees think their system could be improved! Similarly, 93 percent of employees think the connection between their work and company goals could be improved!

Watson Wyatt says these numbers present a measurable opportunity to improve financial results and productivity. Their recommendations:

  1. Eliminate “HR-speak” and focus on business results in the performance management process
  2. Recognize top performers and confront poor performers as soon as possible
  3. Implement user-friendly automation to re-engage managers and employees

Great suggestions all. Still, it’s not clear that automating current performance evaluation processes will lead to improve a company’s bottom-line performance.

September 10, 2006

Do Performance Reviews Work?

Published
on September 10, 2006
in Performance Management
. Comments Tags: , , .

There’s plenty of anecdotal evidence that performance appraisal systems hurt more than help. I’ve been looking for evidence performance review systems help or hurt the bottom line. A New York Times article by Kelley Holland entitled Performance Reviews: Many Need Improvement points to some interesting survey data:

“According to one study by Watson Wyatt, the human resources consulting firm, only 3 in 10 employees believed that their companies’ performance review system actually improved performance. In another study by the firm, almost half of the employers surveyed thought that their managers were at best only slightly effective in helping underperforming employees to improve.”

Those findings feel right, but focus on what managers or employees think about their systems, not how the programs affect actual company performance.

Holland suggests there’s no consensus on a replacement:

“But performance reviews are unlikely to disappear. Many companies believe that a paper trail of reviews can protect them against lawsuits from former employees, and many consultants and human resources executives contend that well-designed reviews, along with frequent conversations about performance, can truly help employees improve and develop.”

50 to 70 percent of managers and employees think their programs are not working, but there’s no movement to change them. Wonder why? According to Watson Wyatt’s study:

“Many corporations view their performance management programs as ‘organizational wallpaper,’ meaning they exist only in the background and aren’t expected to add value.”

Maybe I can’t find hard data because performance mananagement isn’t expected to add value in the first place?

What do you think about performance review systems? Do they help the bottom line? How would you design a replacement?

June 12, 2006
May 9, 2006

Does CEO charisma matter?

Published
on May 9, 2006
in StratBlog
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US News reports on an academic study of the correlation between CEO charisma and corporate financial performance. Does charisma matter? The survey says … apparently not!

"In what is considered the most extensive analysis of its kind, the authors surveyed the top management teams at 128 companies averaging $6.5 billion in assets and 16,000 employees. They asked 770 high-level managers to rate their CEOs on five elements of charisma—dynamic leadership, exemplary leadership, concern and respect for others, high expectations, and willingness to take personal risks. Then the authors compared their findings with the companies’ actual financial results—stock returns, returns on assets, returns on sales, returns on equity, and sales growth—before and after the arrival of the CEO. The results were not what they expected.
"‘If you look at it over the long term,’ says Agle, ‘there is no correlation.’ Charismatic leaders, in other words, have no effect on subsequent financial performance."
If charisma doesn’t matter, what does?
"The lesson here, for investors—and for would-be CEOs—is a positive one, in some ways. Animal magnetism, it turns out, isn’t everything. ‘Charisma is not necessarily the thing that’s going to bring your organization to the top,’ says Agle. ‘Experience and competence and regular leadership skills are sufficient.’ Memo to all of those boards of directors praying for the next Jack Welch: Even if he comes, he may not be able to build anything."
On the other hand, Jack’s charisma may be based on his success at G.E., success based on experience, competence and amazing leadership skills…

April 24, 2006
March 8, 2006

Why ‘Hard’ Management beats ‘Soft’

Published
on March 8, 2006
in StratBlog
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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.

March 6, 2006
  • Why manage at all?

    “What if we did not rest unless and until we found a great match for each management position? What if we never hired people who weren’t interested in managing well? What if we only let rock stars occupy our management jobs?” – (Management Craft)

    [6:38am] - (Comments)
December 13, 2005