​Performance Appraisals That Fail to Perform

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​I have a passion for people. Whether you like the saying that "people are an asset" or not, the success of any manager is not the result of their own hard work as much as it is the efforts of the people they work with.

If the people around you are not performing, you will not perform. If they soar, you are borne to great heights on the wings of their success.

So what does this have to do with performance appraisals? Why is this a topic that boards, executives, managers at all levels, and risk and assurance professionals should care about?

Simply put, performance appraisals that succeed optimize employee performance. Those that fail lead to less desirable outcomes.

An employee who leaves a meeting with his manager with a smile carries that attitude into his work. Those that leave with a frown will share that gloomy disposition with their customers and coworkers, and it will show in their work.

Some managers think that performance appraisals are a chore. They consume valuable time away from the business. They are something they have to do and they do it reluctantly.

Others think this is when they evaluate employees and determine which are doing well and deserve more money, and which need to be told how they are expected to upgrade their performance.

Their staff enter review meetings with both hope and fear, with varying degrees of uncertainty about what they will hear.

This is wrong.

This is not taking care of, polishing, and getting the most out of people — the people who are the key to success, of the manager, the management, and the business.

OK, we all know that (in theory) nobody should be surprised in a review. They should have been told by their manager how well they were (or were not) doing throughout the year. If development was needed, they should already be taking the appropriate steps.

Far too few managers understand that performance appraisals are a precious opportunity to spend dedicated time thinking about, listening, and talking to their people.

It is a time to show that you care, that you recognize the value they create for the organization, and that they are important — to you. Frankly, if they are not important you should not be in management.

Yes, the review can be a time when you decide on money — bonus and/or raise. But that is not what this is all about.

It's about the people. It's a time when you are not thinking about sales or production. It's when you should put all thoughts out of your mind except optimizing the long-term performance of these assets of yours, and by doing that optimizing your own and the organization's performance.

I want to share some true stories; some are wonderful and some are downright ugly. (They are not all about me, but I am telling them as if they were to protect the innocent.)

The ugly

Call from manager's assistant: "Norman, your manager wants to go over your performance with you. I have you down for 15 minutes at 10am next Tuesday."

"Norman, I know you were the top-producing manager in the country, but I can't give you a bonus because the office failed to meet targets. Sorry, better luck next year."

"Norman, we are halfway through the year and I see you have exceeded every target. I am going to revise them up by 30%."

Norman to manager: "I see you have posted for someone with the same job title as me. Do you have a concern with my performance?" Manager to Norman: "I don't think so. Should I?"

Norman to manager in a message: "Joe, I sent you the self-assessment required by the annual appraisal process two weeks ago and haven't heard back. When would you like to discuss it?" Manager to Norman: silence.

Manager to Norman: "Your team lead told me that you question his direction. So, I have marked down your performance accordingly. What do you have to say?" Norman to manager: "Joe, that's the first I have heard. The leader didn't say anything to me and I don't think I am challenging his authority — just asking for clarification. Can you help me with some details, perhaps an example?" Manager to Norman: "What you just said is challenging my authority and proves the point."

"Norman, I have been reviewing the appraisals you did on your staff. I can't accept them because all but one are either 'consistently exceeds' or 'exceeds expectations'. HR says we need to have at least 55% in 'meets expectations'." Norman to manager: "Joe, who are the top ten performers in all of IT?" Joe: "Hmm, they are all in your group." Norman to manager: "So my appraisal is correct?" Manager: "Let me think about it."

"Norman, I can't rate you as 'exceeds' because HR says I can only have 5 employees in that category."

The good

"Norman, I reviewed your self-assessment and think you are too hard on yourself. I know you have very high standards and expectations for yourself, but my assessment is different. Let's take some time and talk about the great things you have accomplished and the potential you show for the future." (From a genius CIO who always showed how much he cared and for whom people walked on hot coals — Ron Reed.)

"Norman, there are no surprises in this year's review. Frankly, it just documents what we have been talking about all year. All I can say is 'thank you' and 'keep it up'."

"Norman, I know we have to go through the formality of this formal appraisal that HR needs, but you can probably guess what it says and I want to take this opportunity to catch up. How is everything going? Anything new since we chatted over coffee a few weeks ago? How did you enjoy the trip to Chicago?"

"Norman (with a big smile), keep it up or you're fired." (From one of the smartest CFOs I ever worked for — Jay Allen)

Why Should You Care?

If you are on the board or an executive, you should care that everybody in your organization is treated well and given every opportunity to excel — which is the only way to optimize performance.

If you are a manager and don't use the performance appraisal as an opportunity to polish gems, in the long term you will be lucky to succeed.

If you are a risk or assurance professional, you should care because failures in this key process can not only fail to optimize performance but can lead to loss of customers (unhappy salespeople seldom sell well) and damage to the business (people putting personal interest ahead of the company's).

Now let's add one final, powerful reason for caring: you may be losing your key people, your top performers — especially as the economy recovers. Last week, I was in Australia for the IIA SOPAC conference and heard an executive for a talent firm (read 'search firm') assert that his company's research showed that about 80% of employees planned to change jobs within the next two years. Only about half that number were 'actively' looking.

Can you afford to lose your team? It's not only the top performers you have to worry about. Just think of the cost and added risk to performance (such as customer relationships) if you lose your steady performers!

Other Mistakes

  • Measuring performance by results alone; giving bonuses to people who are lucky over those who have worked at least as hard and well but have been unlucky. Consider a lazy salesperson whose customers' business is growing and they buy in bulk from him because they need the company's products; contrast this with an industrious salesperson who is able to build trusted relationships with his customers – but they are all in a distressed section of the economy and have very limited funds. Which should get the larger bonus, if any?

  • Failing to consider what behavior and activity you want from the employee in addition to results. Forgetting that what you don't measure doesn't happen.

  • Not taking into consideration what the employee is actually able to influence or the effect of events outside his control.

  • Talking during the year about performance based on behavior (a good thing), but basing the annual appraisal rating on something else.


Do you agree with me?

What should be done? Do you measure employee morale in a meaningful way? Do you monitor employee turnover, by manager, to detect issues?

Do you consider the risk of less than optimal performance by the organization as a result of an ineffective performance appraisal activity?

What is the cost of failing to polish your people assets?

​The opinions expressed by Internal Auditor's bloggers may differ from policies and official statements of The Institute of Internal Auditors and its committees and from opinions endorsed by the bloggers' employers or the editors of Internal Auditor. The magazine is pleased to provide you an opportunity to share your thoughts about these blog posts. Some comments may be reprinted elsewhere, online or offline.



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