The Greatest Myths of Annual Appraisals (Part 2)

This is the second installment in a three-part series debunking common conventions about performance reviews.

Myth: Appraisals Provide Objective and Fair Measurement

In HR, we tie ourselves up in knots ensuring each appraisal results in a rating that’s objective and transparent. Should we have an even number of boxes or an odd number? How about the language — does “average” sound too judgemental, or should we use “meets expectations” instead?

What on earth is the purpose of this tortuous process? Is it supposed to be motivational for the person on the receiving end to be told she “meets expectations”? Can it possibly drive better performance?

Down With Rankings

Rankings and ratings are evident in their worst form in the system known as forced rank distribution. In case you’re not familiar with this, it’s a phenomenon that started in the 1980s that taps into the idea that we need to force managers to be ruthless about weeding out poorly performing employees. All staff are ranked on a distribution curve, and some companies routinely fire those in the lower percentile.

Terrible though this is, I couldn’t help but smile when I discovered during a conversation with an HR director in the civil service that even within this aggressive system, human nature can still triumph. She told me she’d seen many close teams of people share the lowest rating amongst themselves so no one would get it two years in a row (the point at which they would be sacked). Humanity rules, OK!

Joking aside, there are some appalling consequences of forced rank or guided distribution. For a start, it’s hugely demotivating and potentially unfair. It also encourages managers to abdicate responsibility for assessing their staff: “If it were up to me, I’d be giving you a top rating, but I’ve only got three this year and I gave you one last year, so this year you’ll have to do without.”

And finally, it creates a toxic culture in which for one person to win someone else has to lose.

Although Microsoft moved away from forced rank distribution a number of years ago, its chief executive put a significant part of the company’s “lost decade” against Apple down to individual bonuses linked to this system.

The Problem With 360

We also rate people with 360-degree feedback, and it’s become increasingly popular as a way of achieving the ever-elusive goal of fair measurement. Done well as part of a development program, it can be incredibly helpful, but as part of the typical annual appraisal process, it’s a nightmare.

Once a year any given senior manager will receive countless requests to fill in 360s. The problem is, I know from personal experience how hard it can be to fairly rate someone I don’t know that well; although I al-ways intended to do a fair and thorough job, I know I rarely did that in reality.

Then, when the employee on the receiving end of the assessment reads the comments, there are usually two types she’ll pay attention to: the ones she’s already heard (so what’s the point?), and the anonymous, negative comment. The impact of this can be severe.

Marcus Buckingham is a well-known assessment and measurement processes analyst, and his research has shown we’re notoriously bad at judging other people objectively. According to him, 61% of our assessment of others is about us and 39% is about the other person. Of course, there’s still value in our judgements, but if that’s the only measurement employees get at the end of the year, the phenomenon of the “idiosyncratic rater effect” can distort the picture.

Giving Numbers Too Much Power

Let’s think about what this means in reality. During her appraisal, an employee can be happy to talk about how she could improve, but at the end of the conversation her manager will say, “Right, so having talked about this, I’m going to rate you a two.”

I’ve seen the disappointment in people’s eyes so often when I’ve done this; they were hoping for a one, or maybe they’d always had a one before so they felt entitled to it. I had a member of staff who was outstanding, but every year she’d come into her appraisal anxious and agitated; she said it was because of the number she was going to be marked with at the end. We have this crazy situation in which a number has so much power, and yet surely the value lies in the conversation, not in the grading.

I’ve seen no evidence that giving someone a rating improves his performance or productivity one iota. In fact, a top accountancy firm looked at its ratings over a five-year period and found over 75% of its staff had been given the same rating year in, year out; all this did was drive a sense of entitlement to it.

And I keep coming back to the same questions: What is this trying to achieve? Do people feel more motivated and productive as a result? Why bother going through this at all?