Performance Appraisals: Part 2

Those who would abolish performance appraisals contend that appraisals do not deliver positive results. Most people appear to agree. The Society for Human Resource Managers found that 90% of appraisal systems were reported to be unsuccessful. As one reader said to me “I find appraisals a waste of time and money as used in the various organizations I've been in over the years.”

The problem is what to do instead. People get stuck here because it is the wrong question. What we do is a function of what we think. To change our behavior to get better results, we first have to think differently.

Performance appraisals grew out of a command and control management mentality that continues to manifest itself in business today. However, its impact is waning. Increasingly, leaders avail themselves of more sophisticated ways of understanding what makes people tick. Exciting insights have been developed in psychological research and in the real world of commerce.

Today, many leaders are using these insights to revolutionize the way they lead. These same insights can be applied to finding ways to perform the necessary functions performance appraisals seek to fulfill. A number of companies have replaced performance appraisals with effective alternative processes. Startling improvements in financial performance have often accompanied these changes.

While these alternatives have taken different forms in different companies, there is a remarkable similarity across these companies with regard to the thinking that underlies their efforts. In this column, we will examine how those companies chose to think differently. With different beliefs in place, you may have tools you can use to create alternatives to performance appraisals that fit your company.

Many of the assumptions upon which performance appraisals are built do not match up with the way real people operate. We will identify and critique these assumptions and offer general solutions. In the last column in this three part series, examples of how companies have successfully applied such thinking will be shared.

Assumption One: A single appraisal system can serve several functions simultaneously, i.e., provide performance feedback and determine appropriate compensation. Problem: Numerous studies, and millions of personal experiences, testify to the fact that talk about money drowns out all performance feedback. People just don’t hear it. “What will I tell my wife” blocks out the manager’s rationale. Solution: Create different systems to provide feedback and to establish fair compensation.

Assumption Two: One appraisal process can fit all supervisors’ styles for giving feedback and all workers’ styles for learning. Problem: Personalities are different. Different supervisors are comfortable giving feedback in different ways. Perhaps even more important, different people learn in different ways. Solution: Create a flexible program that makes room for different styles.

Assumption Three: People will respond well to a forced process. Problem: You didn’t like being forced in high school, and you don’t like it any better now. Solution: It is no mystery that cooperation is earned through such things as emotional support, encouragement, or an exciting vision, as well as choices about how to get feedback and what to do with it. Whereas performance appraisals inadvertently create Theory X thinking, alternatives that work rely on a shift to Theory Y beliefs.

Assumption Four: Leaders are responsible for employee development. Problem: This belief is seductive. It makes it appear that we have control that we do not. No one can control anyone else’s behavior. It is inappropriate to hold ourselves responsible for things that we cannot control. Further, this belief leads employees to behave dependently (“It’s up to my supervisor”) rather than to take responsibility for themselves. Solution: Hold people responsible for their own development. This approach encourages adult behavior. The company can take responsibility for creating opportunities for development but not for whether employees take advantage of them. (Have you ever been to a company sponsored seminar that just was not for you?)

Assumption Five: Feedback can be on a fixed time table. Problem: Different people need feedback at different times, depending upon what they are doing, what significant events may have occurred, and their personality. Solution: Provide feedback when it will be most effective, such as when someone asks for it or after an important event, positive or negative.

Assumption Six: Performance appraisals can be objective. Problem: Research clearly demonstrates that even well intended people are, well, people. We have biases. Information is incomplete. We tend to respond to the most recent events as though they were representative of the entire rating period. Solution: Accept that subjectivity exists. Be thoughtful about how heavily you rely on subjective judgments when making decisions about pay and promotion. Don’t hide behind numbers that appear to be objective but are not.

Assumption Seven: People are extrinsically motivated by such things as praise and money. Problem: All of us appreciate praise and money. However, the most powerful motivation comes from within. Companies that rely on performance appraisals to motivate high performance forget to find ways to tap into internal motivation. Money can be a demotivator when it is perceived as being distributed unfairly. Solution: Create conditions that leverage employees’ internal motivation. Such conditions include a supportive atmosphere, meaningful work, and a compelling vision.

Assumption Eight: A company can dramatically boost its achievement by focusing on individual performance. Problem: A focus on individuals is a small lever. Solution: Focus on widespread work processes and systems. Doing so provides a huge lever. It moves us away from blaming individuals, which often leaves us helpless, to working with aspects of the company that leaders can actually impact.

Conclusion: We have all done performance appraisals as part of our management heritage. As we learn more about what makes people tick, we have more options about how to access the best performance available. If we let discoveries about human nature guide us, we can design systems that can perform the functions for which performance appraisals are intended.

Dana C. Ackley, Ph.D., is founder and CEO of EQ Leader, Inc., which helps individuals and companies solve problems and build skills. He can be reached at (540) 774-1927, or by e-mail at

The comprehensive science based EQ Leader Program builds lasting change in EQ skills that make a dramatic difference in performance.

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