Reflecting on performance appraisals…

William Edward Deming, the father of quality management, listed ‘evaluation of performance, merit rating and annual review’ as the third of his ‘seven deadly diseases’. These are the ‘diseases’ Deming considered to be the most serious barriers that management faces to improving effectiveness and continual improvement.

Those that have participated in an annual performance appraisal might long to be at Adobe. It has been reported that Adobe have banished the annual formal performance appraisal in favour of a far more sensible approach. An approach that positions assessing performance as a relationship between grown-ups rather than a tick-a-box process that adds little value to the lives of managers or employees.

Performance appraisal is a surprisingly recent but amazingly persistent management fad that remains in most organisations in nearly exactly the same form as it originated

We begin by reviewing the preceding year, we set goals for the coming year, we have a mid-point ‘check-up’, and we close the year by looking back at what was completed. We might ‘rack-and-stack’ those at the same level across the company to make some additional judgements about ‘talent’, and then we recognise and reward as necessary. So, what’s the problem with way performance appraisal is done?

Mostly, the problem is that thirty years of research into performance appraisal consistently shows our usual approach consumes a lot of time and produces little or no return. For instance, research regularly finds that the majority of people report receiving little or no guidance on how to improve their performance as a result of their performance appraisal. Reviews of the literature show that regardless of the stated purpose of the performance appraisal system—feedback, development, organisational alignment, pay—there seems to be limited evidence that it is a process that has any positive effects. And, we have known this for a long time.

For example, in 1986, a study across 84 different performance management systems in 35 different organisations found that:

• The majority of people who are rated less than the highest on a rating scale disagree with the rating.
• The majority of people who disagree with the rating are less motivated and less dissatisfied with their jobs after the appraisal.
• The majority of these people reported have ‘little or no idea’ how to improve their performance.
• The differences between self- and supervisory appraisals are largely a function of perceptions that there were factors beyond the control of the employee influencing the outcome.
• Those being rated focus on external factors while those doing the rating focus of the attributes of the individual.
• That performance appraisal has become such a fixed part of business practice is difficult to fathom.

Changing the terminology from ‘performance appraisal’ to ‘performance management’ in the late 1970s in order to bring in the elements of a more comprehensive approach to individual assessment does not seem to have improved the situation. More likely, the attempt to humanise and broaden the performance appraisal system just made it more complicated.

The media reporting of Adobe’s decision to abolish annual performance reviews has carried an underlying tone of awe and wonder. A moment taken to reflect on our own experiences of the process (as a manager and employee) and the considerable research that shows it delivers limited value, suggests that Adobe was just making a sensible business decision to stop wasting resources. They didn't stop investing in assessing and improving performance, they decided to do it differently. Not brave, just sensible.

For a long time, all sorts of different organisations survived and prospered without formal performance appraisal systems. This raises the question: why do formal performance appraisal systems exist? My guess is that it was a question like this that set off the chain of events that led to Adobe’s final decision. Maybe, more leaders should be asking this question; or better still, what is our current approach to performance management contributing to organisational capability?