The promised synopsis if my "Now What?" article is presented below. It's a
little bit choppy but I think I've kept the main points. The full article
can be found at
http://home.att.net/~nickols/articles.htm.
The main objections to scrapping the performance appraisal system can be
expressed as questions:
If we didn't have a performance appraisal system,
How would people receive feedback?
How would people find out what is expected of them?
How would employees get their work objectives?
How would individual and organizational interests be aligned?
How would employee training and development needs be determined?
How would people be recognized and rewarded?
How would merit raises be determined?
How would the organization protect itself against lawsuits for wrongful
dismissal or discrimination?
If we didn't have a performance appraisal system, how would people receive
feedback?
This question posits the manager as the source of feedback. The manager
can indeed share his or her views of the performer and his or her
performance but that is "feedback" about the employee's standing in the
manager's eyes and only indirectly related to the employee's
performance. True feedback, that is, information about actual conditions
in relation to desired or goal conditions can be obtained by the performer.
The answer to the question "How would people receive feedback?" is that
they would receive it the same way they do (or don't) now -- as a regular,
integral part of their working activities. It stems from their observations
of their working activities and the effects and consequences of those
activities in light of their own intentions (whether or not these
intentions are consistent or inconsistent with the expectations of management).
If we didn't have a performance appraisal system, how would people find out
what is expected of them?
Through a process of continuing dialog. Because expectations change, they
must be discussed on a regular basis. The frequency of such discussions
must match the rate of change in the work itself. To rely on stilted,
formal performance reviews as the mechanism for conveying what are
essentially unfolding expectations seems likely to prove singularly
ineffective.
If we didn't have a performance appraisal system, how would employees get
their work objectives?
Work objectives are time-tied, measurable expectations of results. As
stated earlier, these need to be developed as part of an ongoing stream of
two-way dialogue, not as part of some periodic ritual designed to reinforce
the illusion of control. Performance appraisal systems are not necessary to
the development of clear, mutually understood and agreed to work
objectives. Indeed, owing to their punitive aspects, performance appraisal
systems might well constitute a hindrance to setting work objectives, not a
help. [There is no better discussion of this point than Douglas McGregor's
classic HBR article, "An Uneasy Look at Performance Appraisals." Harvard
Business Review (May-June 1957).]
If we didn't have a performance appraisal system, how would individual and
organizational interests be aligned?
Why do they have to be aligned? The transaction between the individual and
the organization is frequently little more than an economic exchange; pay
and benefits in return for work performed. [See March and Simon's book,
Organizations, for a clear exposition of the concept of contributions and
inducements.]
The alignment to be achieved here is between pay and benefits and the work
contributions expected from the employee. Keeping pay scales aligned with
the labor market is probably more important than anything that happens in a
performance appraisal session. Again, it is a process of regular, ongoing,
two-way dialogue that is required, not periodic appraisal sessions where
the employee is being judged.
If something more in the way of commitment and caring on the part of the
employee is desired, it is the employee who does the aligning, not the
organization.
If we didn't have a performance appraisal system, how would employee
training and development needs be determined?
The answer, in a nutshell, is through assessment. This might be a formal,
structured assessment, perhaps a performance test, or it could be an
informal, loosely-structured assessment, as when a person takes stock of
his or her strengths and weaknesses in relation to job requirements. A
performance appraisal system is not required for either kind of assessment.
To rely on performance appraisal systems as the primary means by which such
assessments are conducted is to put performance appraisal systems to a use
for which they are ill-suited and, at the same time, to consign any real
needs for training and development to the scrap heap. Training and
development needs must indeed be dealt with, but a performance appraisal
system is not the mechanism for doing so.
If we didn't have a performance appraisal system, how would people be
recognized and rewarded?
On the basis of their contributions to the organization, that much is self
evident. No manager worth his or her salt needs help in identifying or
recognizing those who contribute to the organization, and the mechanisms
for recognizing and rewarding people and their performance are abundant and
well-known (e.g., bonuses, plaques, lunches, certificates, etc.). The
difficulty lies in equity and in the politics of equality.
The equity difficulty lies in gauging the value of employee contributions
so that recognition and rewards are commensurate with those contributions.
Unusually noteworthy contributions are readily identified; they stand out,
they draw attention to themselves. No performance appraisal system is
needed. But what about sustained, long-term contributions of high quality?
It seems obvious that an annual performance appraisal system won't do.
Something else is required.
The political issue lies in ensuring that rewards and recognition are
consistent with employees' views as well as management's views. Employees
often have a different picture of who is contributing what to the
organization. From their perspective, the real contributors often go
unrewarded. One obvious solution here is to make available a certain amount
of funding for employee-awarded rewards and recognition.
In any event, performance appraisal systems simply don't play a
significant role in rewards and recognition. Moreover, attempting to make
them serve that purpose, coupled with their known punitive qualities, draws
attention to their carrot-and-stick nature.
If we didn't have a performance appraisal system, how would merit raises be
determined?
Who says a merit increase is necessary? Automatic annual pay raises
inflate the wage and salary structure. A periodic cost-of-living increase
might be desirable for retention purposes, but this can be accomplished via
incremental increases that have nothing to do with performance or
performance appraisals. Sterling performances of a one-time,
situation-specific nature are best handled via bonuses and other one-time
means, not by ratcheting up the basic pay scales. As mentioned earlier, pay
scales should be aligned with the labor market, not driven up automatically
each year as the result of merit increases.
It is also the case that annual merit raises are quite modest, even at the
extremes of the rating scales. Their motivational value is dubious, and
linking them to performance appraisals adds little value.
The short answer to this question is that you shouldn't have merit
increases, let alone tie them to performance appraisals.
If we didn't have a performance appraisal system, how would the
organization protect itself against lawsuits for wrongful dismissal or
discrimination?
There are two goals here: 1) discouraging lawsuits, and 2) winning them
when they occur. There is no evidence indicating that performance appraisal
systems discourage lawsuits and quite a bit suggesting that performance
appraisal systems backfire in court. Thus, the first purpose is not served
and the second is ill served.
Part of the answer to the question is to "keep book" on those employees
who are targeted for dismissal, but only on those employees, not the entire
employee population.
The best protection against lawsuits for discrimination is not to
discriminate and to be able to show that the effects of discrimination are
not widespread in the organization. If such effects are demonstrably
present, the specifics of an individual case won't matter much. [As is
always the case in such matters, seek competent legal advice.]
--
Fred Nickols
The Distance Consulting Company
"Assistance at A Distance"
http://home.att.net/~nickols/distance.htm
nickols@worldnet.att.net
(609) 490-0095