The Performance Appraisal Is Driving Your Talent Away

Many organizations use the annual performance appraisal as a tool to inform employees of the value added by their work throughout the year. Often this is the only feedback employees receive from a manager all year.

In 1950 the Performance Rating Act was passed, mandating annual reviews of all federal employees. Over the years, both private and public sector organizations created instruments to evaluate employees and linked bonuses and salaries to these assessments.

The now-traditional performance appraisal with a rating scale, not linked to a competency model or professional development plan, does more harm than good to retain high-performing employees. In a 2013 study conducted by Kansas State University Associate Professor Satoris Culbertson and colleagues, it was found that high-performing employees were annoyed by “negative” feedback on the annual performance appraisal.

The feedback provided on the appraisal was given without recommended actions to improve or a professional development plan. Simply highlighting the “performance problem” was a problem for these “star” performers.

According to Peter Cappelli, director of the Wharton School’s Center for Human Resources, “If you wait a year to tell employees how they are doing, they are almost always surprised and unhappy if the results are not positive.”

It seems documenting less than positive feedback on an annual appraisal form has the potential to demotivate high performers. Individuals who are at the top of their game on the job and highly engaged are discouraged by such feedback. Should this be considered a flashing red light?

There is a deep divide about the value of traditional performance appraisals. Many human capital experts believe the traditional approach is fundamentally flawed. This argument is one of few HR topics elevated to C-suite conversations.

During an interview with the Washington Post, Accenture CEO Pierre Nanterme said, “For the millennium generation, it’s not the way they want to be recognized, the way they want to be measured. If you put this new generation in the box of the performance management we’ve used the last 30 years, you lose them. We’re done with the famous annual performance review, where once a year I’m going to share with you what I think about you. That doesn’t make any sense. Performance is an ongoing activity. It’s every day, after any client interaction or business interaction or corporate interaction. It’s much more fluid.”

Successful companies such as Accenture, Adobe Systems Inc., Deloitte, IBM Corp., Microsoft Corp. and others have eliminated the traditional performance appraisal.

Samuel Culbert, author of“Get Rid of the Performance Review!” said: “They destroy the trust between the boss and the employee, and cost the company enormous amounts of money in terms of time and wasted effort. The people being reviewed worry about pleasing their boss before they concern themselves with delivering results to the company.”

No Silver Bullet

Creating a culture that encourages continuous improvement in the way business goals are achieved and of individuals’ skills, behavior and contributions to realize a mission is the target for most organizations. No doubt, a silver bullet does not exist, and one solution will not work for all. Taking time out to consider what works to motivate employees in a specific company or industry is doable, however, and should work for every management team committed to extraordinary success.

Changing the mindset to focus on creating a performance development process rather than a performance management system could create a workplace that enables people to perform on the job at their highest competency level.

Getting people in organizations to focus on the company’s strategic plan and their role in execution is crucial. Management teams need to move away from undivided attention on the job description to engage its workforce.

Connecting employees to the mission and overarching purpose of the company requires understanding of “big picture” strategy: What does it mean to me? Where do I fit in the picture? What am I doing specifically to make this company successful? 

Managers need to give feedback to each team member regularly and be held accountable for doing so. It needs to be meaningful — tied to measurable behavior that is linked to achieving specific results and aligned with the organization’s strategy. Individual performance objectives discussed (throughout the year) and based on goals that support the overall direction of the organization is what employees need to leverage talent for the good of the company and their career.

When searching for talent to “get the job done” and execute strategy, management teams look for exceptional skill. People who are considered the best at what they do or have the right mix of education, experience, motivation and passion to excel desire for career advancement. How often do you hear, “We just need an ‘average, normal’ person to fill the role?”

Keeping the traditional performance appraisal as part of business process is analogous to accepting “average, normal” for the organization. That will not move the organization forward. It will not do anything to retain the most valued talent needed for innovation and critical thinking required to get to the next level.

Moving to the next level requires people working in the organization who have “skin in the game” — people going above and beyond. And, Evidence is mounting in support of throwing out the traditional performance appraisal to keep “star players.”

Kim Morris Lee is director of organizational effectiveness at University of Illinois at Chicago. Comment below or email editors@workforce.com. Follow Workforce on Twitter at @workforcenews.