Deconstruct the Performance Appraisal

The traditional performance appraisal attempts to do too much.

There is the performance summary and evaluation for the previous 12 months.  There’s a rating and pay decision. There’s a development plan to put together and possibly a career discussion. And then there are other things HR or senior management might add, like evaluating employees on values .

Each of these topics is important. But convenience is the only reason to discuss all of them on an annual schedule or in the same meeting.

My suggestion: just do the performance summary and evaluation. That is the performance appraisal part of the performance appraisal, the core. You can do everything else at other times.

Performance Appraisal 

Here’s what should be discussed during the performance appraisal.

• what’s gone well
• what could or should have gone better
• what the employee and manager did in response – e.g. corrective action, development, re-planning, etc.
• how that went.

That’s it. That’s all. That’s plenty. 

If the manager has been doing his or her job, there will have been regular meetings throughout the year to discuss those items. If that occurred, the annual meeting simply serves to summarize what the manager and employee previously discussed. There shouldn’t be any suspense or surprises. It doesn’t even have to be a big event.

One benefit of this approach is that, because it’s a summary, the annual review provides a useful perspective on progress (or lack of it) for the entire year. Individual meetings during the year might not do that.

The other benefit of an annual review is documentation. Critics of the performance review don’t discuss this. But it’s a very practical issue and probably one of the primary reasons performance reviews are not going to disappear.

The performance review is a primary source of documentation for most organizations. They use it for decisions on pay, promotions, lay-offs, employee discipline, etc. Companies that want to eliminate performance reviews must figure out how they’re going to get the documentation they need.

One other point. There are those who complain that this forces people to look backward and not forward. They’re right. But that’s what an evaluation is.

If the manager hasn’t been having regular performance discussions with his or her employees, the performance review discussion is likely to be a mess in all the ways people have written and talked about. Given that, it’s easy to understand the desire to eliminate the performance review. But eliminating it won’t cause managers to have more discussions. Eliminating it gives managers permission to have fewer discussions.

The best way to ensure that managers have those regular performance discussions is to require it of all managers. If you can make regular discussions part of the work process, that’s even better. Just don’t depend on hope and good intentions. 

Now for the other elements that usually make up the typical performance review.

Performance rating and pay decision

The performance review is not an effective platform for announcing a pay decision. Those in HR, particularly in compensation, want us to believe that there is a strong relationship between performance and pay. As I have written elsewhere, there isn’t.  The rating and pay decisions often are based more on the salary pool than performance. That means the pay discussion is both highly impactful – because it’s about money – and largely meaningless in terms of actual take-home pay. A half or full percentage point more than the pool might have symbolic significance. But symbolism doesn’t pay the bills.

Unless the pay decision is meaningful, there’s little point in even discussing it.  Just give the employees the 2% – 3% most were going to get anyway and just move on.

The fact is, in most companies, you could have this discussion any time. 

Employee Development and Career

The development discussion usually comes at the end of the performance review. That’s the wrong time. A performance evaluation focuses people on the evaluation. Development is not about an evaluation of the outcome. Development is about improving the knowledge and skills needed to get to the outcome (whatever the evaluation.) In other words there isn’t a natural flow from evaluation to development.

If you have an overwhelming need to discuss development, identify some possible development goals. Then give the employee a week or two to arrive at one or two very specific development goals to discuss with the manager. The direction of the development can be general, but the development goal itself – and accompanying plan – need to be specific. The manager should not mistake a development goal for development plan and stop paying attention after the goal is identified.

If the manager and employee have had regular performance discussions during the year, this process might be unnecessary. That’s because they would have identified areas for development already and implemented a plan.

Just as there is no requirement that managers and employees meet only a once a year to discuss the employee’s performance, there also is no requirement that a development plan be formulated only once a year.

As for career, the performance appraisal summary can provide a helpful context for discussion because it enables the manager and employee to look back over the previous year. As with development, this conversation probably should happen at another time. But it’s not clear whether the manager should conduct it. Managers aren’t always well equipped to discuss specific next steps – especially in today’s climate with frequent reorganizations and layoffs. The manager can have a general discussion about his or her area of specialization and what it takes to progress in that field, even if progressing means moving to a different organization. But in the end, it probably is best to involve HR with this.

Your take away

• The traditional performance review attempts to do too much.
• Focus the performance review on the employee’s performance. Deal with the other elements in the typical performance review at other times during year.
• The manager and employee should be required to meet regularly during the year to discuss the employee’s performance. If that happens, the performance review can become an extension and summary of those discussions. Documentation should accompany every discussion and is an important benefit of the performance review.