The Future of Performance Assessment: From Evaluation to Dialogue
Performance appraisal and assessment has been a critical part of the HR practitioner’s process repertoire for decades. The annual or semi annual performance appraisal cycle involving “evidence-gathering” and evaluation of past performance has been an administrative nightmare for HR and line managers, a necessary evil for top management and a feared morale-destroyer for most employees.
The form and shape of performance appraisal has evolved through the years, expanding its focus to take a more holistic view of “performance management” whilst incorporating approaches such as Management by Objectives, Balanced Scorecard, Total Quality Management and so on. However, the fundamental philosophy of performance assessment has remained the same – focusing on past performance against agreed metrics. Many thought leaders in the HR fraternity have questioned the value achieved by the traditional approach to performance appraisal, describing it as a new form of “Taylorism” and as leading to negative or counter-productive outcomes. Some organizations such as Adobe have gone so far as to abandon the traditional approach to performance appraisal and assessment.
A Critique of Traditional Approaches to Performance Appraisal or Assessment
The traditional approach to performance appraisal as a kind of “post mortem” of the employee’s performance conducted by the line manager has been critiqued by several HR thought leaders. A summary of some of the key points of criticism is given below.
1. Despite the advent of performance “management,” most organizations still focus primarily on the appraisal step
The philosophy of performance management takes a holistic view by looking at the multiple stages of Performance Planning, Performance Feedback and Performance Assessment or Appraisal. However, in most organizations, the vast majority of the time and effort investment in performance management continues to remain in the appraisal or assessment stage.
2. Performance feedback is often negative and one-sided, making employees focus more on “failures” and development areas rather than “strengths.”
Performance Feedback is often delivered to the employees in a rather “paternalistic” manner where the assumption is that the line manager knows more about the employee’s skills, abilities and performance than the employee himself. Feedback usually focuses on “what was not done” rather than on recognizing successes and carrying forward learnings.
3. Performance assessment is seen as an event focusing on affixing “ratings” to employees and arbitrarily influencing compensation.
The performance assessment or appraisal stage is usually focused on “labeling” employees through performance ratings, which in turn influence compensation decisions. These ratings and consequent compensation or reward decisions are often perceived as unfair, lacking objectivity and transparency and prone to bias.
4. The positioning of the process increases employee defensiveness and limits honest dialogue.
The traditional performance management process is linked to rewards and compensation decisions. Hence, performance feedback and performance assessment discussions are often not constructive, open or positive. Employees shy away from having an honest discussion on their performance and enablers or disablers since they may fear that any sign of weakness may be thrown back at them while performance ratings are decided. Thus, most performance conversations tend to focus more on “impression management” rather than being honest discussions on current and future performance.
5. The process focuses on the individual at the expense of team and organizational enablers of performance.
As the very nature of jobs and organizational relationships change in today’s world, performance assessment that is purely individual-centric may become increasingly out of sync with organizational realities. Our work systems today are increasingly collaborative in nature with myriad interdependencies. Many system theorists also point out that the “system” has far greater contribution to both individual and organizational performance. This aspect is often not taken into account in traditional individual-centric performance assessment processes.
6. The output of the process does not result in reliable talent decisions.
The impact of rater biases is often visible in performance ratings across organizations that usually do not sufficiently differentiate amongst employees or show skewed distributions. Thus, these biased or inaccurate ratings may not provide a true picture of the health of an organization’s talent pool. Since many organizations use performance ratings as the foundation of critical decision-making in succession planning, compensation management, development planning etc., the quality and validity of these talent decisions is often impacted.
The Future: Moving From Performance Assessment to Performance Enhancement
Changing workforce expectations and recent research on motivation and rewards theories challenge some of our fundamental assumptions about performance management. In this light, several critical levers have been proposed for performance management in the days to come.
1. Focusing on ongoing performance dialogue
The concept of annually set static goals may work well for certain jobs. However, for the vast majority of knowledge sector and service based jobs, goals are fluid and often unpredictable. Therefore, a key focus area will entail setting ongoing expectations and near-time goals as situations change. In order to operationalize this, the conversation between the line manager and the employee will move away from being a one-way, annual “download” of performance feedback to an ongoing year-round two-way dialogue that happens through frequent formal and informal conversations.
Therefore, a key imperative is to build an organizational culture that shares, accepts and encourages feedback on an ongoing basis. At the same time, ongoing performance dialogue will focus not just on performance but also on an employee’s all-round development and career aspirations. Training line managers on coaching and development and on having meaningful career conversations is, thus, likely to be a critical focus area for HR practitioners.
2. Greater employee engagement in the process
Traditional top-down approaches to performance management are unlikely to work in an increasingly “social” environment. Many progressive organizations are engaging their teams and departments in translating the organization’s goals into their own success criteria rather than “cascading” preset goals to them. Organizations are also experimenting with bottom-up approaches to performance planning, sometimes using social media tools such as Rypple.
3. Taking a systems approach to performance management
The notion of “performance” often extends beyond the individual himself and is greatly impacted by the organization’s culture, structure and processes. Also, traditional performance approaches take an overtly individualistic approach, overlooking the nature and value of team interactions. Thus, organizations will increasingly benefit from focusing on improving the “system” itself rather than solely focusing on individual performance.
4. Delinking annual performance ratings from rewards
Performance ratings as the single most important driver of compensation and rewards decisions often results in biases and skewed ratings. Many management thinkers have proposed at least a partial decoupling of annual performance ratings and rewards.
A system centered on ongoing performance dialogue will result in ongoing performance assessment and feedback as well. This could serve as a cumulative input into compensation and rewards decisions, thus minimizing the impact of biases such as the recency effect. This also eliminates performance and behavior “spikes” and “troughs” that may occur due to the linkage of a singular, year-end performance rating to reward decisions.
5. New technology and process modifications
The emergence of new technologies provides immense possibilities for performance management. Electronic monitoring and ongoing reporting of performance provides employees with real-time feedback and analytics that they can act upon. Online employee-initiated multi-source feedback systems may become an increasingly relevant feedback input in a collaborative work environment. Social performance management platforms are also being adopted by many progressive organizations, which help in decentralizing and democratizing performance management and embedding it into the DNA of the organization.
6. Shifting the lens from the past to the future
The future of performance management is likely to be less of performance “assessment” or appraisal and much more of performance “enhancement”. In this context, management thinkers such as Samuel Culbert have proposed “performance previews” rather than performance “reviews”. In these performance “previews,” the boss-subordinate team will be evaluated as a unit thus creating a conducive environment for ongoing constructive performance dialogue. The focus of performance dialogue thus becomes “How can WE do better?” rather than the one-sided “How can YOU do better?” that is so familiar to us. This helps organizations play to employee’s strengths rather than their weaknesses in work assignments and also helps keep the focus on enhancing future performance rather than just evaluating past performance. Thus “feedback” systems are likely to be replaced by “feed forward” systems.
Traditional top-down, once a year approaches to performance assessment and appraisal may have no place in a world of unprecedented competitive pressures, flatter structures, leaner staffing levels collaborative work environments and empowered, decentralized teams. A system that is focused on looking back at past performance and assigning performance ratings in retrospect, will severely limit organizational agility as well as impact employee motivation. Sustained organizational performance is likely to be achieved in future through a holistic, year-round, development-centric process that focuses on developing the capabilities not just of individuals, but of wider teams and the organization itself.
Niranjana Harikumar is an organizational development consultant who has consulted with several organizations in the areas of talent management, leadership development and employer brand management.