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Why Performance Appraisals are Worthless

Why Performance Appraisals are Worthless

Performance appraisals have come to be a fact of life in the business world. It is estimated by Tom Coens and Mary Jenkins, authors of Abolishing Performance Appraisals, that 90% or more of all organizations conduct performance reviews in some form. It is, therefore, unnerving to realize appraisals add no measurable value because appraisals tend to judge and criticize employees instead of evaluating and improving employee methods.

Performance appraisals come in different forms. They may range from the simple written appraisal by an employee’s manager to a more intensive method called the 360 degree feedback instrument in which all those who “surround” the employee—customers, boss, colleagues, and direct reports—give a rating (a grade). Typically, employees are rated (or graded) on a scale of 1 to 5.

Companies that rely on performance appraisals to evaluate employees have the best of intentions. Unfortunately, however, those intentions frequently backfire. Employees do not see the value of performance appraisals. The Watson & Wyatt WorkUSA® 2004 study revealed that only 3 out of 10 U.S. workers say their company’s performance management program actually does what it intends to do—improve performance. And only 2 out of 10 workers say their company helps poorly performing workers improve.

An Explanation

Even when the employer’s stated intention is a positive one, which is improving motivation and performance, employees often end up feeling unfairly rated and unfairly judged because they are personally judged. This sense of being judged reduces trust; and a reduction in trust damages creativity, fun, and productivity. Just the opposite of what the employer hoped to accomplish.

There are several reasons why subjective judgment of the person, rather than empirical data about that person’s methods, undermines the appraisal process:

People do not like being judged.
Try this at home: Announce to your significant other that it’s time for a performance appraisal. Let him or her know you have decided that improving performance will enhance the family’s well-being and improve your relationship. What kind of reaction do you think you would get? Eighty percent of employees believe they are in the top 25% of all performers. Any rating below that creates disappointment and damages employee motivation.
Judgment is subjective, not objective.
Judgment is an opinion or an interpretation. Employees need data, not opinion, to improve. Since managers are busy and short of time, they rarely collect enough (or useful) information to provide a credible opinion.
Judgment stifles creativity, reduces productivity, and creates fear.
Employees fear a damage of their reputation, loss of credibility, and embarrassment because these may affect their employability, relationships, and ability to advance. Employees who fear a low rating will take fewer risks and suggest fewer new ideas.
It is impossible to effectively distinguish between employee performance factors and situational factors.
The circumstances that affect employee performance are very important and are difficult to evaluate along with the individuals being rated. “Stuff” happens prior to a performance appraisal that can positively or negatively impact an individual’s performance. For example, a report may have been submitted late because accurate information took extra time to collect. How can a manager rate an individual poorly when his or her performance is impacted by these circumstances? Any judgment by a manager will seem unfair from the employee’s perspective.
The problem may be the process, not the employee.
In most cases, employees are already doing the best they know how. Performance problems often result from faulty processes or poor training, not from an individual’s actions. Judging employees instead of evaluating workflow methods is unfair to the employee. At the same time, it prevents managers from focusing on improving processes and training.

An Alternative to Performance Appraisals

First, recognize the need to replace judgment with data. Collect empirical data, or help the employee collect data. Then use the data to elicit feedback. For example, if a manager is concerned about an employee’s mistakes, perhaps he or she can give the employee a tool to collect data, and then encourage the employee to make suggestions about how to reduce or eliminate the mistakes. People do not want to make mistakes. A manager does not have to introduce a “grade” to motivate.
Second, coach (do not threaten them with a grade) employees to improve their individual performance and help them work cooperatively to improve their workflow methods. If the manager wants employees to answer more calls per hour, he or she should help them track the data and coach them to suggest ways to reduce their wasted time.

Managers must change their focus from judging people to judging methods. Instead of using performance appraisals to rate the employees, they should rate the methods they use—and change those methods if they are faulty or flawed.
Motivation, productivity, creativity, and fun will increase when managers stop judging people and start evaluating methods.

Wally Hauck is a nationally-known speaker and facilitator who helps strengthen “organizational immune systems” by creating cultures of trust and quality. His company, Supertraining, Inc., is a source of insight for organizations and individuals. He may be reached at

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