Wharton On Performance Reviews

http://knowledge.wharton.upenn.edu/article.cfm?articleid=2760&sms_ss=email&at_xt=4db97022df9cee4c%2C0

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"A successful man is one who can lay a firm foundation with the bricks others have thrown at him." (David Brinkley)

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Performance appraisal is one of my favorite targets! According to the Wharton article attached, a Sibson Consulting SVP estimates that only about 35% to 40% of companies do performance reviews well. Really, how about NONE?

Consultants know what you tell them. How many of those companies actually do verifyable opinion surveys of their employees where the feedback (on whether performance appraisal programs are working well) is real? VERY FEW.

So, the latest influx of employees in the workforce includes a generation of millennials (those born between the late 1970s and early 1990s) who are accustomed to constant and instant feedback. If they want the same from employers, something has to change. Once per year performance appraisal doesn't work anyway and especially doesn't work for this group.

So, what to do. A favorite person I've quoted in the classroom and who is referred to in the Wharton article is Samuel Culbert. Culbert is a professor in the Anderson School of Management at UCLA. Here's a quote: "They [performance reviews] destroy the trust between the boss and the employee, and cost the company enormous amounts of money in terms of time and wasted effort. The people being reviewed worry about pleasing their boss before they concern themselves with delivering results to the company."

That's accurate.

Culbert suggests a form of performance "preview" which he defines as discussions that take place when there is still time to get good results. I'd say frequent discussions while doing the work that involve boss and subordinate in continuing feedback and adjustment to circumstances as it relates to the overall mission or missions. In that way, there's no formal meeting and feedback is continuing.

360-degree feedback works well at those companies that are dedicated to its use at every management level. It involves individuals being reviewed not just by their bosses, but by their subordinates, peers and, if appropriate, their customers and suppliers. GEICO (now a successful Warren Buffet company) uses 360 at every level. The feedback is intended to be anonymous and the idea is to have more than one evaluator.

We'd talk about "forced rankings" here but there's no point. They are not a realistic alternative in spite of the fact that GE and Jack Welch brag about them. They foster competition instead of cooperation and are useless in the average company.

The SAS case study that's referred to is important. SAS is often mentioned in OB texts as a model company from the point of view of good companies to work for. This year and last year, it's been ranked #1 in the "Fortune - 100 Best Companies to Work For." Aside from what they did about performance appraisal (which was probably consistent with their culture - a good thing), the process of performance appraisal training caused them to create a "technical ladder" for promotions for people who had no potential management skills.

In the end, even if there is no formal performance appraisal system, there is an informal one. In those cases, the great companies are using multi-level feedback and evaluation similar to 360 programs - it's just not formal. Most efforts to make a performance appraisal system "formal" fail.

Continuous feedback and supportive teamwork are the most important thing. Formal performance appraisal programs are the least important thing.