I have recently received a number of questions about abolishing performance appraisals, sparked in part by my last blog as well as Josh’s writing on the topic (“Is It Time to Kill the Performance Appraisal?: The Next Generation of Performance Management”).  Since my last post, I have examined the issue in greater detail, and wanted to share some of my learnings and thoughts on the issue.    

As you likely know, the concept of employee management was historically based on Frederick Winslow Taylor’s concept of scientific management, where an organization runs like a machine, and the employees themselves are individual components of that machine.  In this world view, employees are things to be rigidly controlled, monitored and assessed for efficiency.  In a machine, there is no room for creativity and innovation; the focus is on getting a very specific job done as efficiently as possible.  Of course, this is not what our world looks like now.  In an increasingly knowledge-based economy, our focus is directly on innovation, creativity, and driving new value.  In fact, our most recent Talent Watch report showed an almost 15 percent increase in the need to accelerate innovation from the second half of 2009.  Clearly, the output we need from our employees is very different – so many ask, why are we continuing to assess them as if it is not? 

Ten to fifteen years ago, we heard rumblings of abolishing performance appraisals.  The proponents then argued that performance appraisals do not work, citing sources such as the Society for Human Resources Management, which reported that more than 90% of appraisal systems are ineffective.[1]  During the mid-1990s is also when we increasingly saw the rise of systems thinking, Total Quality Management (TQM), Malcolm Baldridge Assessments, Six Sigma and ISO 9000.[2]  As Tom Coens and Mary Jenkins point out in their book, Abolishing Performance Appraisals : Why They Backfire and What to Do Instead, this new type of thinking, focused on systems and process improvement, was in direct contradiction to previous assumptions of how people work. 

Figure 1:  Comparison of Previous and Emerging Thinking about Performance[3]

 

Previous Thinking about Appraisals	Emerging Thinking
Forced Process	Empower People
Individual Accountability	Collaborative Teams
Motivate with Incentives	Unleash Intrinsic Motivation
One Size Fits All	Respect Diversity
Controlling Structures	Emerging Structures
Annual Event Approach	Just in Time
Rely on Inspection/MBO	Improve Processes
Improve the Parts	Improve Whole Systems

 

Those who advocate eliminating performance appraisals argue that the goals of empowering people, encouraging collaborative teams, and improving the whole system are in direct contradiction with the current method of assessing individuals on their performance.  The latter is focused on ultimately holding individuals accountable, detracting from a full commitment to the team and organization.  Further, proponents of abolishing performance appraisals argue that the bulk of performance is actually due to the system in which employees work, rather than incremental increases in individual efforts.  As such, assessment on those individual efforts is actually an ineffective, if not harmful, way of improving overall organizational performance. 

 

Over the last few years, we have only seen an increased focus on improving the systems in which employees work.    For example, we see many organizations using (or considering adding) performance consultants; individuals who are charged with taking a systematic approach to understanding and improving human performance.  (I am currently working on a case study on performance consulting, and we have case studies from Accenture, Blue Shield of California, and CUNA Mutual on performance consulting in our library.)

 

A number of organizations have chosen to organize themselves in different ways that align with a systems and team-oriented way of thinking. 

 

For example, W.L. Gore (see page 59 in the link) has embraced an overall systems theory and employee empowerment approach.  W.L. Gore does not have traditional managers and does not use a traditional performance appraisal process.  Instead, W.L. Gore has a long history of supporting pay-for-contribution, which rewards employees for their level of contribution, but is not tied to a specific pay grading structure.  Pay-for-contribution is measured by an official poll among colleagues within an associate’s team, where associates rank each other on their contribution to the overall team performance.  Team leaders, sponsors and HR take part in the ballot sheet, and the results are averaged out to calculate a pay rise proportional to each employee’s effort.  Each associate is assigned a sponsor who is different from his / her team leader.  The sponsor works with the associate on his / her personal development – which is not linked with pay. With the guidance of their sponsors, and an understanding of opportunities and team objectives, associates commit to projects that match their skills.  This takes place in an environment that combines freedom with cooperation and autonomy with synergy.

Generally speaking, we are seeing a move away from performance management as we used to know it.  For example, in our research (page 27 in the link) in 2008, we saw that 60% of organizations were using a “coaching and development” model of performance management, and 40% were using a “competitive assessment” model.  In 2009 (see page 66 in the link), the number of organizations using the coaching model increased to 64%, and the competitive evaluation model decreased to 36% of organizations surveyed.  This increased focus on coaching makes sense, since our 2009 Talent Management Factbook (page 67 in the link) shows that organizations that use a coaching and development model of performance management are more effective at retaining top performers and developing great leaders.

I am currently in the process of researching and writing a report on organizations using the coaching and development model of performance management.  In fact, earlier this week I spoke with a $4.5 billion organization that has actually abolished performance reviews, in an effort to transition to a more development and coaching-focused culture.  In my next post, and in a webcast on July 28, I will talk more about the work they are doing and steps organizations can take to make the transition to a coaching and development model.  In the meantime, if you work for an organization that has “killed the performance appraisal” (or is considering doing so) please e-mail me at stacia.garr@bersin.com I would like to discuss the drivers behind the decision, the challenges you are facing and how you hope to address them.