No More Performance Reviews! by Will Phillips January 2010 Despite widespread use of employee performance reviews, savvy executives have known for years that these type of reviews offer few benefits toward operations or personnel. The most widely-known research on improving performance was spearheaded several decades ago by W. Edwards Deming, often known as the father of the quality movement. At first, Toyota took the lead in implementing his ideas, which have been a major factor in their increase in market share, which ultimately undermined the US automobile industry. Deming developed 14 principles, which are designed to help a company to improve its performance, and of course one of the biggest was: never, never do performance reviews! He stated that performance reviews blamed individual employees, and even more importantly, business performance is in fact rarely linked specifically to differences in individual performance. Rather, it is almost invariably due to the success or failure of the processes and systems within the business. What are the Key Messages? In a recent business week editorial (August 3, 2009), Jeffrey Pfeffer of Stanford University's business school reiterates the key ideas: Managers don't like doing appraisals. (They put them off and struggle to get them done.) Employees don't like getting them. (They do want pay increases and may ask for evaluations as a step to increased pay.) The appraisal process is bankrupt. Managers who review someone that they themselves hired tend to give higher ratings than someone who did not hire that employee. Since reviews occur so infrequently, they have little effect on improving performance. Gender and race affect reviews (even though people think they don't). Performance has less to do with individual performance, and more with how a system or a team operates. In fact, focusing on individual reviews then causes the team to lose the opportunity to improve. How the Research Shows Up in Real Life In working with an organization who wanted to implement performance reviews, my team found that just educating the managers about the research wasn't enough. So, we decided to set up a blind test for the management bowling team to help them understand why reviews don't work. We took them to a bowling alley and set up a curtain across the lanes to hide the results of their bowling. We then counted the number of pins that were knocked down and delivered a hand-written message to each manager right after their bowling attempt. The managers found the experience frustrating because they wanted more specific feedback than just the number of pins they had hit, such as exactly which pins fell. Before long (along with a few beers) they realized that giving reviews without detailed and immediate feedback is about as practical as bowling blind! Starting Strong But Ending Weak A while back on a strategic consulting initiative for several clients, our team conducted two major appraisal design processes (against my protests of course). In each case, it became clear that that the organization and employees go through a process in developing performance reviews, which, like many attempts at change tends to fail in the long run. Here's what happens: Management decides to set up a performance appraisal process. In the beginning, anxiety levels about the reviews are high, decreasing productivity in the short run, and perhaps even long term. Managers research and find assistance in developing the process. Great energy and effort is expanded and managers are usually confident with the process, even if they don't have data yet to know if it's working effectively. Managers and employees are trained, many of whom are excited about the new process. Unfortunately, many of them also find that reviews are ineffective at fixing the performance of employees who probably should not have been hired in the first place. About 24 months later, energy levels for the project begin to flag, particularly when improved performance fails to happen. Three to four years later, many organizations have resorted to giving bribes such as tickets to a football game to get managers to complete the reviews. Organizational commitment and enthusiasm if often at an all time low. Around this period, the appraisal process disappears off the radar screen and within a few years has been forgotten. I might even venture to say that the major beneficiaries of appraisal and performance evaluation systems are often the consultants who get companies to improve the efficiency of a totally ineffective process (our company excepted, of course!). Here are some options that I recommend to doing performance reviews: Set clear expectations on what want from each person. Generalized job descriptions often miss the mark. The number one expectation to clarify is what specific results you expect from each person and in what time frames. New hires should have a list of results that they review and agree to accomplish in the first week, first month, first quarter, etc. These must be reviewed in a timely manner with coaching as needed. The business should have clear guiding decisions. These include such things as a statement of Vision, Mission, Objectives as well as a clear statement of Values or Principles that guide all behavior. The simpler these are the better. And everyone should learn to hold everyone accountable to these 'rules of the game'. Imagine coaching a team sport and seeing a players strengths or their shortfalls and not telling them about these until the end of the quarter. Your coaching would not only have little value, your lack of feedback allows the players to form very bad habits. The very best review information is immediate. Immediate PRAISE, immediate CENSURE and CORRECTION. Immediate means within 24 hours of your noticing the behavior. This is real coaching. REFERENCES: Ken Blanchard's One Minute Manager is one of the best and simplest guides to giving both positive and negative feedback to an employee.