Ah … the annual employee performance appraisal. It’s a popular tool of many business owners (85-90% of all organizations use them) although it’s also one of the most frustrating and ineffective tools. They do more to damage employee engagement than any other policy or procedure. As a matter of fact (in its current form), I am working hard to make sure it becomes obsolete.
Why the current Performance Appraisal doesn’t work:
Other than a firing, the performance appraisal meeting is the most disliked task of managers today. Why is the current performance appraisal tool so frustrating and ineffective?
Here are just four reasons to think about.
They are biased and most often arbitrary
They are based primarily on the opinion of the manager or supervisor and this means the manager must be omnipotent and we all know they are not. This can damage the relationships and interactions between the supervisor and the employee and improving the quality of interactions between employees is more important to improve performance than using performance appraisals to improve the quality of the employees. This damages employee engagement.
Appraisals focus on the person not the system
They blame the person and ignore the influence by the process (or system or environment) on that person. While the traditional appraisal tries to improve the quality of the individual parts (employees), the systems approach tries to improve the quality of interaction between all parts therefore making the team better as a whole. This damages employee engagement.
They damage innovation
The very commodity every organization needs to remain competitive is damaged by the typical appraisal. Employees are blamed for problems because they are rated based on events or their behavior in the system. The more dysfunctional the system the more employees behave dysfunctional. This blame creates anxiety. Anxiety stops creative problem solving and innovation. The work by Daniel Goleman on Emotional Intelligence has helped us to understand that an environment of anxiety is a barrier to innovation. The chemical necessary for problem solving are not available to the anxious. This damages employee engagement. Didn’t you Mom always tell you, “Don’t make decisions when you are upset?”
They create unintended negative consequences
Employees looking for a good rating in their performance appraisal may hide mistakes to prevent a lower rating. They might also withhold information from coworkers to compete for bonus money. This damages employee engagement.
Our economy is now is more “brain based” rather than “labor based”. While few managers would dispute that we are living in “the Information Age,” many companies are still employing management tools developed during the evolution of the Industrial Revolution; the era when machine driven economies were the rule.
The very complexity of the new competitive world requires continuous information exchange among its units; the expansion of competition into a global economy has created the need to understand and adapt more quickly to trends and techniques which may take place half a world away.
Successful managers have adopted many different kinds of technology to stay on top of the enormous volume of information they must assimilate, and increasingly seek more efficient ways to access timely, complete and accurate data. Without the latest technology, your competitive advantage will suffer, and this applies to the management of people as it does to every other aspect of business.
Creating a highly effective organization that can adapt and compete requires that we capture and utilize the motivation and engagement of all employees. To do this, we must be on the cutting edge of “management and leadership of people” technology – and to be at least as conversant with those tools as we are with our customer databases. We must capture every mind and heart just to stay competitive. We must “up-grade” our leadership tools just we would up-grade our software for a new computer. The old software does not work well (or even at all) on a new computer. The same is true with our “leadership software”.
Wally Hauck holds a doctorate in organizational leadership from Warren National University, a Master of Business Administration in finance from Iona College, and a bachelor’s degree in philosophy from the University of Pennsylvania. He is a Certified Speaking Professional and for 15 years his consulting firm, Optimum Leadership, has consulted with dozens of organizations and coached hundreds of individuals in improving leadership skills to boost employee engagement and performance.