Having Cold Feet about Replacing those Performance Evaluations? Ask Yourself these Four Key Questions

In the last newsletter I mentioned an immensely popular, seldom pursued, and extremely controversial subject:  the elimination of performance appraisals.   Why have so few of you eliminated them?  More importantly, why should you?

Except for the few people who regularly receive perfect evaluation scores, everyone loathes the annual evaluation in much the same way that we loathe maggots, cockroaches, and the muddy river leech.  But why?  Are appraisals really the problem or should employees simply get a grip and work harder to get the kind of evaluation they believe they deserve?  These four key questions can help us sift through the performance appraisal issue.

1.  Why do you really use performance evaluations?  What type of work culture do you really want to create?

2.  Do they accomplish your intended goals?

3.  What are their real effects?

4.  Do you really need any kind of performance appraisal system at all?

As you may be aware, steam is building around the country for getting rid of the annual performance appraisal; Texas Roadhouse is but one example.    One of the Roadhouse VPs, Mark Simpson, said the senior leadership team had been trying to figure out for some time how to separate the performance appraisal process from merit increases. “When performance and pay are tied together, it creates an emotional conversation,” he said.  “We wanted to change the performance discussion to become more productive and constructive.”

Roadhouse calls the new performance appraisal process GPS (growth, plan, support).  “Its purpose is to be forward-looking instead of backward,” he said.  “Managers already had regularly scheduled one-on-one meetings. That’s the time to talk about current performance. The new GPS process focused on the future”:

GROWTH:              What career opportunities would you like in the future?

PLAN:                      How do you prepare for those future opportunities?

SUPPORT:              What resources do you need to be successful?

Just in case you’re wondering, at Roadhouse, any regularly scheduled pay increases are based upon cost-of-living. But discretionary increases can happen at any time and are based upon three factors:

1.  Taking on additional responsibilities

2.  Exceptional performance

3.  Promotions

The interesting thing about the Roadhouse approach is that it tends to give employees more choice and control over pay increases rather than control being wielded by supervisors who, for the most part, don’t relish that responsibility anyway and who are almost never perceived to be fair or unbiased under the current connection of appraisal and merit increase.

So, Why Do You Use Performance Evaluations?

From what I can tell, there are five commonly identified reasons for using appraisals including:

1.  Compensation (who deserves a merit increase?)

2.  Staffing Decisions (who should be fired or laid off?)

3.  Feedback/Communication (a tool to improve understanding between supervisors and employees)

4.  Coaching (a method to motivate employees so as to improve both internal and external service)

5.  Termination and Legal Documentation (CYA in preparation for disciplinary and discharge decisions)

Do They Accomplish Your Intended Goals? 

That is a question you will have to answer for your own organization.  And I hope you will mull it over.  But if your hope is that you can create a work environment of inclusion, partnership, honest and caring two-way communication, cooperation, and trust then what I can say is that appraisals are an interference, and there is absolutely no evidence that it motivates people or leads to meaningful improvement.  Frankly, it is my experience that appraisals create a barrier between many supervisors and employees.  Why?  Because it is a single tool intended to accomplish the five major business functions noted above.  Lost are voluntary interactions like:

-On time coaching

-Just in time ratings/rewards

-Employees taking the initiative to ask their boss for feedback or suggestions

-Feed-forward instead of feedback that focuses on effective methods for future endeavors rather than corrections over past “screw-ups”

-On time recognition and appreciation during and following a project or endeavor

The Real Effects

One hundred years ago the performance appraisal was probably better than nothing and may have even been useful.  Henry Ford’s assembly line was revolutionary.  People were parts of a large machine and they needed to be controlled in order to enable the machine to operate efficiently.  Reducing jobs to identifiable, repetitive tasks made it easier to control what people did.  The performance appraisal was ideal for ensuring that people stayed in line.  Thus, the “machine-model” organizations came into being and top-down organizations became the blueprint.  But simple, mechanistic tasks no longer accurately describe the job functions of today’s employee. A myriad of certifications identify expertise.  Job postings list specific levels of education, experience, or require nationally recognized certifications.  We are working in an era of experts who have valuable information and knowledge to be shared.  Along with this knowledge, training, and accomplishment comes pride and the need for freedom, not an environment of control that is created through the annual performance appraisal.  The result is very simple:  discouragement, frustration, and apathy.  But we don’t have much turnover, you say.  Perhaps not, but the mental and emotional “checkout” means that you may not have engaged employees.

So in ending, ask yourself this question again, “Do I really need performance appraisals at all? What kind of culture am I trying to create?”  This discussion to be continued in our next newsletter.