Do an online search about performance management and one thing you’ll find is that the performance appraisal process is consistently called performance management. The two are treated as if they are the same. They’re not.
For example, there is the criticism that the performance appraisal looks backward over the previous year instead of forward to the coming year. That is absolutely right. Performance appraisals provide an evaluation of how someone has performed over the previous year. By definition they look backward. You can’t evaluate what hasn’t happened yet. It is performance management that has a future orientation.
And then there is the criticism that once yearly feedback is insufficient for managing performance. That also is correct. Performance appraisals are an annual summary and evaluation of what has gone well and what needs to go better. A summary can provide general direction, but because it is a summary it is not very helpful as specific performance feedback, which is what is needed to manage performance. It is the performance management process that provides regular specific feedback during the year.
So, let’s clarify.
Performance appraisals serve one purpose, performance management serves another. An easy way to illustrate the distinction is to think of each as a one of two different types of feedback: evaluative feedback or developmental feedback. (These also are called summative feedback and formative feedback.)
The performance appraisal is, as the name suggests, evaluative feedback. It documents how well someone has performed during the year. In my view, that’s all it should do. Most people are uncomfortable with the performance appraisal because it is an evaluation, which is a high stakes event. Some important things are contingent on the results.
Most immediately there is a compensation decision. But long term there are other decisions that may be based, at least partly, on the documentation in the performance appraisal. Here I’m referring to staffing decisions such as promotion, transfer, layoff, etc. Disciplinary actions also utilize this documentation. Performance appraisals have been used as input to both flag poor performers and identify possible high potential employees.
Bottom line: the performance appraisal is essential for providing documentation related to individual performance.
This is not to say that performance appraisals do a very good job at documenting performance. In general, they don’t. Here is a link to an article that describes that in detail. There is at least one other thing they don’t do well.
Performance review results will not provide useful data on organizational performance or which company has terrific performers and which has mediocre ones. There is no reason they would. The ratings are not organizational they are individual, and every rater has his or her own reasons for how they rate individual employees.
Again, the performance appraisal is primarily an evaluation not a performance management tool. Does the evaluation impact someone’s performance? Maybe. My guess is it’s probably about as much grades at the end of the school year impact performance the following year.
The purpose of performance management is to help an employee improve their performance and accomplish their goals during the year. Performance management utilizes development feedback. Development activities tend to be low risk. People experiment. They know it’s ok if they don’t do well immediately, though most also know they should be learning from their mistakes.
If discussions periodically include talk about the relation between current performance and potential ratings, regular performance discussions can greatly diminish the negative impact of performance appraisal discussions.
The performance management process is a straightforward developmental process. The manager checks in with his or her direct reports to see how they are doing with their goals and provides various types of assistance – feedback, coaching, problem solving, etc. Sometimes meetings are short and on-the-spot, sometimes they are planned – think weekly/regular check in meetings.
The employee’s goals can be the result of a flow-down from organizational goals. See the OKR process. They also can be specific items the employee and his/her manager might have identified.
In practice, performance management can look a lot like coaching. If you’re not sure what that is, think of a project status meeting – manager and employee discuss how the employee is doing on one or more goals: what’s going well, what could go better; feedback is delivered and discussed. They might do some problem solving and identify next steps. The goal(s) or plan to accomplish the goal(s) might change. They might set up a follow-up date. And that’s it.
There are factors that can and do complicate this. Things like poorly defined goals and measures and lack of skill in delivering feedback. Those are beyond the scope of this post.
Performance management is a developmental activity. Performance appraisal is an evaluative activity. They are not the same. They are not supposed to be the same. Calling the performance appraisal performance management only leads to confusion and dissatisfaction.
The performance appraisal provides necessary information. As I have written elsewhere, the performance appraisal process is cumbersome and over-complicated and would greatly benefit from some simplification and focus. Regardless, because the performance appraisal provides essential information it is not likely to disappear.
Performance management should occur regularly throughout the year. Done well, it can help employees improve their performance and meet their goals. Additionally, if discussions periodically include talk about the relation between current performance and potential ratings, regular performance discussions can greatly diminish the negative impact of performance appraisal discussions.