Training & Talent Management Systems Provider

Leadership Perspective on Performance Appraisal

Leadership Perspective on Performance Appraisal

Performance appraisals are a popular activity in nearly all organizations.  Each year, managers are asked to take significant amounts of time from their busy schedules to appraise the performance of their employees.  The employees, in turn, are asked to sign-off on the ratings given by their manager.  In most cases, these ratings are used for determining raises or promotions.  In other cases, they are used for setting performance goals.  In nearly all cases, the ratings have little to do with what the employee actually does on the job and the end result is one of frustration and/or cynicism from the managers and the employees regarding the process. This effect is much greater than we should find acceptable for an activity that is both necessary and useful for measuring, motivating, and managing performance.

Over the past five years, we have conducted surveys and interviews with over 100 senior leaders and managers from across a wide range of industries and government agencies to identify what works best in employee performance measurement.  Nearly 100% of these leaders identified the critical value of performance measurement for directing and motivating employees, but over 80% reported “little to no” observable performance improvements in their workforce that could be attributed to their existing performance measures.

Nearly all of these leaders reported that the biggest problem with their existing systems was that they focused on outcomes of performance (i.e., productivity goals) rather than the work their employees actually do on their jobs.  Employees have control over their work behaviors and can impact outcomes through direction, persistence, and development; however, they have much less control over business outcomes.  Goals may be important, but knowing what to do to reach them is much more important for employees.

Likewise, we found that managers are frustrated by the narrow focus on outcomes in performance measurement systems, when they know that their employees need consistent direction aimed at work behaviors in order to impact outcomes.  If not given actionable performance feedback, employees become cynical about the process and withdraw effort from their jobs.  Managers in our survey reported that they needed grounded tools that would direct employee job behaviors–not high level goals from the clouds.

This was not a situation unique to a few situations–we have found the same sentiment across organizations.  Given the success of a few vendors in convincing businesses that an outcomes based performance measurement system (i.e., cascading goals) was best, performance measurement processes have the same issues  in many organizations.  The process has been widely adopted and  participants have been trained to use the measures.  A great deal of effort has been placed into preparing and implementing the measurement activities.  The outcomes of the process have been elevated to critical importance for employees and leaders (i.e., compensation).  However, when it comes to the desired impact (i.e., employee motivation to higher job related performance), the outcomes based systems have completely missed the mark.  Very few leaders report that the activity actually motivated any employees, or caused performance development.  Employees are not motivated by business outcomes and they become cynical due to this approach.

We (I/O psychologists) have known that outcomes based performance measurement is flawed for years, but we have focused much more on the predictors of performance than on the actual performance measures.  However, NAMC research supporting high utility and high return on investment for PointLeader talent management tools has required valid measures of employee job performance.  We needed valid performance measures that align to the critical competency requirements of the job, are reliable enough to measure changes in performance over time, and can provide feedback that is specific enough to the critical job competencies to be useful for motivating and developing employees to higher performance.  In other words, the only way that we could measure success of our talent management system was to include a valid measure of job performance that met these psychometric criteria. That led us to create a reliable and valid item bank based measure of performance that is aligned to the critical competencies for any job.

Dr. Scott Davies