Performance Appraisals - Are They Effective?

I've been spending a lot of time lately writing end of year performance
appraisals.  Studies show that this is #2 on any manager's list of tasks that
they dislike.  Firing someone is #1.

I agree that writing appraisals is a pain.  I don't know any manager that
likes doing this.  On the flip side, does the direct report (recipient)
really care?  I know many that just want the bottom line-are they getting more
money?  I'm sure there are some that appreciate the feedback, but when it
comes from their manager, how relevant is it?  Unless the manager is working
side-by-side, day-to-day with their direct reports, how much do they really
know  about  what they do and how they do it?  For years I've received
performance appraisals from managers that had virtually no insight into what
I did, other than gathering feedback from people that did know.

A survey by the Society for Human Resources Management found that more than
90% of appraisal systems are not successful.  Hundreds of other studies and
surveys also support the inadequacies of performance appraisals.  So why do
we do them?  Mostly to determine raises, bonuses and promotions.  What's
interesting  is that greater-than-average-awards have little impact on
personal motivation or improving an individual's value in the organization.
Also, these awards tend to be de-motivators to the rest of the organization.

Dr.  W.  Edwards Deming wasn't a fan of appraisals.  Dr. Deming, often
referred to as the father of the Quality movement, named annual appraisals,
merit ratings, and similar practices as one of the "Seven Diseases" that
stand in the way of building healthy companies.  When he spoke about this,
his audience was surprised.  They would ask questions like:

  * How will we know who is deserving of raises and bonuses?
  * How will we know whom to recognize?
  * How will we know which people to promote?
  * What are the legal ramifications?
  * How can we fire people who are not performing?
  * How else can we provide feedback?
  * How will we motivate people to improve performance?
  * How will we know who needs to be trained, and on what skills?
  * How will we set goals… and measure them?
  * What criteria would we use in the case of a layoff?
  * How would we help problem performers improve?

His response-"try leadership".

Peter Scholtes worked with Deming for many years and has written books on
leadership and teams.  He was give the Deming Award in 2006 for his "efforts
to inspire others to transform organizations by helping managers understand
how successful  leadership of people requires an understanding of the
interdependencies among knowledge about variation, psychology, appreciation
for a system, and the theory of knowledge".  Scholtes said that the major
criticism of appraisals is performance appraisal's assumption that the
problems of an organization are attributable to the individual performance
of  individual  employees.  It also assumes that the way to improve an
organization is to improve each individual employee.

Deming and Scholtes wonder why systems tend to be ignored.  According to
them, this is what needs to be appraised.  Here's more from Scholtes:

“It's a false theory about problems, and a false theory about solutions. It
ignores entirely the existence of systems and, by and large, most managers
don't understand systems. And even when they try to think about systems,
they tend to think about people and organizational structures.  What Deming
taught the Japanese in the 1950s was that systems are the cause of problems
and the cause of solutions. If you want to improve what you're doing, you
have to improve your systems.”

Scholtes defines a system as a sequence of interdependent steps or a set of
interactive factors which lead to the outputs of the organization.

“Sometimes it's what you want, sometimes it's not want you want, sometimes
it's a combination of both – but it's the whole system which creates that.
If you want to improve, what you do is to improve the system: you don't
badger the people to work harder or work smarter. You don't threaten them
with  punishment  or promise them rewards. That's looking in the wrong
place.”

Scholtes  rebuffs  the  suggestion  that  performance  appraisal is an
organizational system.

“No, it undoes the system of the organization. That's why it's difficult to
explain the difference between a system and what we ordinarily look at when
we see an organization.

“The easiest way to understand a system is to start with the purpose of the
organization and who its customers are, and then identify a product or
service and look at everything that happens as that product or service gets
developed and delivered. What happens is a series of
interdependent steps which contribute to the outcome."

“Managers, for instance, provide a number of things to the system. Among
others, they provide policies – and just like any other suppliers – what
they provide will either help or hinder the work of the system. Performance
appraisal  is  one  of  those  dysfunctional  supplies from, well-intentioned but not very thoughtful managers."

Scholtes contends that the objective should be to have outstanding systems
which will function well with the ordinary efforts of ordinary employees.
Performance appraisals, in contrast, assume that _organizational success
depends on the heroic efforts of outstanding individuals and that the heart
of any failure is an individual worker who has screwed up.

Hmmm...so now what?  Well, I still have my appraisals to do...that or get
the boot!  But I am looking at the systems that my team utilizes, trying to do
what I can to simplify them as much as possible.  Also, I'm trying to be
clear on expectations for tasks and behavior, providing context to help
them understand What and Why.  I'm also still looking for individuals that
are driven to learn and deliver results, because the systems we use aren't
perfect.

What do you think about performance appraisals?  Do you think they are
helpful or not?  I'd like to know your thoughts, so feel free to leave a comment!