1. THE CASE AGAINST
PERFORMANCE
RATINGS AND WHAT TO
DO INSTEAD
by Paul De Young, Ph.D. www.deyoungadvice.com
pdeyoungphd@gmail.com Phone: +1 (213) 407-4712
RatingsRatings
2. No Ratings!
1
Objectives
Raise awareness of the need to eliminate annual
performance appraisals in organizations
Generate and discuss ideas about what to do instead
for your organizations
Agenda
Discuss our collective experience of performance
appraisal
Discuss the merits and demerits of performance
appraisal
Discuss what to do instead of performance appraisalDe Young Consulting www.deyoungadvice.com Phone +1 (213) 407-4712
3. Performance Appraisal Defined
2
The formal process of evaluating or judging the way
in which an individual is functioning, and:
Employees’ work performance, behaviors, traits are rated,
judged, described by someone else
Ratings, judgments, and descriptions relate to a specific time
period rather than a product or service
Process is systematically applied to all employees or groups
of employees
Process is mandatory or induced by extrinsic motivators (e.g.,
eligibility for a pay raise)
The results are documented and kept by someone else in the
organization other than the rated employee
Source: Coens & Jenkins. Abolishing Performance Appraisals, 2002
De Young Consulting www.deyoungadvice.com Phone +1 (213) 407-4712
4. Exercise 1: What does your company’s
performance appraisal intend to
accomplish?3
1. What are the objectives your organization’s
performance appraisal system is intended to
accomplish? What are the appraisals used
for?
2. Discuss with the person sitting next to you
3. Be prepared to share your answers with the
group
De Young Consulting www.deyoungadvice.com Phone +1 (213) 407-4712
5. Typical purpose(s) of performance appraisal
4
To determine pay
To identify candidates for promotion or selection
decisions
To give employees feedback
To provide communications between supervisor and
employee
To give direction and focus to employees
To aid in career development
To identify training needs
Others?De Young Consulting www.deyoungadvice.com Phone +1 (213) 407-4712
6. Exercise 2: Rate Your Performance
Appraisal Process
1. Write down your overall rating of your current performance
appraisal process in how it has improved your
performance or your companies’ performance?
5 = Superior exceeds expectations (Exemplary)
4 = Exceeds expectations
3 = Meets expectations
2 = Needs improvement
1 = Unsatisfactory / Far below expectations (Possible termination)
2. Discuss with a partner, why you rated your performance
appraisal system the way you did. What are some of the
challenges?
5
7. Top 10 Challenges of Performance
Appraisals
1. Undermines teamwork
2. Create losers, cynics, and fear
3. Disregard the existence of a system. They generally encourage
individuals to squeeze or circumvent the system for personal
gain rather than improve it for collective gain.
4. Disregard variability in the system and to some extent
unnecessarily increases the variability
5. Use a measurement system that is unreliable and inconsistent
6. Encourage an approach to problem-solving that is superficial
7. Tend to establish an aggregate of safe goals--a ceiling of
mediocrity--in an organization
8. Seek to provide a means to administer multiple managerial
functions (pay, promotion, feedback communications, direction-
setting, etc.), yet are inadequate to accomplish any one of them
9. Creates reductions in productivity
10. Institutionalizes existing values & biases
Adapted from: Peter Scholtes. Total Quality or Performance Appraisal: Choose One, National Productivity Review 1993 and
Harvard Management Update 2000
6
8. The Roman Army would periodically
“decimate” their workforce
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The military context of the word
“decimate” can be traced back to the
Romans, where the decimation of a
military unit was a form of punishment
and a way of enforcing discipline. The
word decimate comes from the Latin
word decimare meaning to take or
destroy one-tenth (from the Latin word
decem meaning ten). For a Roman
legion deemed to have failed in its
duties this meant that one in ten
legionnaires would be selected,
stripped of their armour and beaten to
death.
De Young Consulting www.deyoungadvice.com Phone +1 (213) 407-4712
9. Today we “Topgrade” our workforce
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“Topgrading is the definitive manual for becoming an A
player and for recognizing those traits in others.”
Larry Bossidy, former CEO Honeywell
and coauthor of Execution
“Topgrading is a detailed how-to
manual for packing one’s team with A
players (the top 10 percent of talent
available at all salary levels),
clearing out the Cs (bottom
10%), and using expert coaching
techniques to turn B players into As.”
De Young Consulting www.deyoungadvice.com Phone +1 (213) 407-4712
10. The dark side of performance appraisal
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Many companies in America have systems by which
everyone in management or in research receives from his
superiors a rating every year. . . . Management by
objective leads to the same evil. Management by numbers
likewise. Management by fear would be a better name. . .
.The effect is devastating.
W. Edwards Deming, Out of the Crisis, 1982
De Young Consulting www.deyoungadvice.com Phone +1 (213) 407-4712
11. Exercise 3: What to do instead?
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1. Imagine a world with no performance
appraisals in organizations. Then reality hits
and you realize that you still need to improve
performance of your organization, pay people
fairly, motivate them, etc. What might you do
to accomplish these objectives without a
performance appraisal process in your
organization?
2. Discuss with your partner.
12. Case Study – Glenroy Inc.
“In my 21 years at this company, not a day
goes by that I don’t actually look forward to
going to work.”
Nancy Seager, HR Director at Glenroy Inc.
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De Young Consulting www.deyoungadvice.com Phone +1 (213) 407-4712
13. Case Study – Glenroy Inc. Flexible
Packaging Manufacturer
About the Company
200 employees
Non-unionized
Low turnover
All employees meet with CEO 1/month
Situation
HR, managers, employees disliked
performance appraisal process
Costly, took too much time, did not
produce expected returns
Was considered painful to manage and
painful to do
Performance ratings tied to incentives
created competition and inhibited
collaboration
Response
24 years ago, CEO decided it was time
to eliminate appraisals
Removed pay for performance
incentives (more on next slide)
No sales quotas or sales incentives
Result
Feedback delivered more timely,
frequently
Managers don’t wait for scheduled
appraisal meeting
Enhanced collaboration, info sharing
More employee ownership of
development
Sales increase, no layoffs during
downturn, joint investment in company
success
No unions in a heavy unionized
12
12
14. Compensation at Glenroy
• Hire Rate
• Learn about the company
• Interim Rate
• Learn more about the job
• Job Rate
• Up to Speed
~ 5%
~ 5%
Annual increases same across company based on market
If change jobs, move into interim rate
Also includes profit sharing of 3-4% on average
Start at ~60th percentile of pay range
15. What to do instead?
1. Change the way you think
2. Stop doing it
3. Develop organic and sustainable alternatives
De-bundle the multiple functions (e.g., pay, selection,
promotions, development)
Develop organizational measures that matter and
connect the dots to key processes
Focus on improving organizational performance
Adopt a coaching model to improve individual
performance
Compensation – focus on critical segments and tailor
compensation to the culture, adopt gain-sharing
Educate supervisors on origins of performance and
motivation, establish ways to document.
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De Young Consulting www.deyoungadvice.com Phone +1 (213) 407-4712
16. Suggested reading
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Abolishing Performance Appraisals, Coens &
Jenkins
The Legal Case for Eliminating Performance
Appraisals, Judith Droz Keyes, HR Magazine
The Leader’s Handbook, Peter Scholtes
Out of the Crisis, W. Edwards Deming
De Young Consulting www.deyoungadvice.com Phone +1 (213) 407-4712
17. When will we get it?
“The aim of reviewing the subordinate's
performance is to increase his effectiveness, not to
punish him. But apart from those few employees
who receive the highest possible ratings,
performance review interviews, as a rule, are
seriously deflating to the employee's sense of worth
... not only is the conventional performance review
failing to make a positive contribution, but in many
executives' opinions it can do irreparable harm.”
Rensis Likert, Harvard Business Review, July 1959
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De Young Consulting www.deyoungadvice.com Phone +1 (213) 407-4712
18. Thank You!
De Young Consulting www.deyoungadvice.com Phone +1 (213) 407-4712
Editor's Notes
5 minutes
New job, part time Mr. Mom. I am expecting my 6 month performance review from my wife any day now.
People are pretty stressed out. One of the stressors is giving and receiving performance appraisals. One of the reasons I quit was I didn’t want to have to give or receive another performance appraisal.
No ratings – should be a sign in the workplace like “no firearms” or “no smoking”
Used to be a believer in perf. Appraisals. Took classes in graduate school and was taught the many ways of imrproving performance through performance appraisal. But not long after that my first job was with the Navy and I was introduced to W. Edwards Deming in the late 80s, the guy who helped transform Japan’s quality processes in the 50s. One of his 7 deadly diseases of management was the annual performance ranking of individuals. What was he talking about? Was this blasphemy?
Then I had my first performance review. Now I understand.
Don’t get me wrong, I am not saying anything about measurment
1 minute
2 minutes
5 minutes
Is a multipurpose tool kind of inferior on most fronts?
5 minutes
Draw out on flip chart with bell shaped curve
Source - AUTHOR: Scholtes, Peter R.
TITLE: Total Quality or Performance Appraisal: Choose One. 1993
A military officer with a Ph.D., who is stationed at the Pentagon and who wishes to remain anonymous, observed that performance appraisal systems serve to institutionalize the values and prejudices of those in power — and to protect these values and prejudices from challenge.
6. Why is there oil on the floor? Because the machine is dripping oil.
* Why is the machine dripping oil? Because the gasket is leaking.
* Why is the gasket leaking? Because it is made of inferior material.
* Why do we use gaskets of inferior material? Because the purchasing
agent got a good deal on them.
* Why is it important for the purchasing agent to get a good deal on
gaskets? Because his performance is evaluated on how often he can get
good deals on things.
The word decimate in the English language has come to mean to destroy or slaughter something but the word has an older historical meaning. The military context of the word can be traced back to the Romans, where the decimation of a military unit was a form of punishment and a way of enforcing military discipline. The word decimate comes from the Latin word decimare meaning to take or destroy one-tenth (from the Latin word decem meaning ten). For a Roman legion deemed to have failed in its duties this meant that one in ten legionnaires would be selected, stripped of their armour and beaten to death by their comrades
Ask, what tactic are they both using?
Institutionalizing Existing Values & Biases
A military officer with a Ph.D., who is stationed at the Pentagon and who wishes to remain anonymous, observed that performance appraisal systems serve to institutionalize the values and prejudices of those in power — and to protect these values and prejudices from challenge.
The arrow is a spear that is used as part of the Topgrading process
5 minutes
One of those multipurpose tools that seems real cool at first, but then you realize you need a real screwdriver most of the time.
Identify a key work process.
* Identify the customer(s) of that process.
* Learn what characteristics of the product or service--the output of
the key process--are most important to the customer.
* Get feedback from the customer(s) on how well these characteristics
are met.
* The next step is that managers must refrain from using this data to
evaluate an employee and continue to encourage each employee to develop
feedback loops such as this for all the key tasks.
Why would an organization carry on a tradition of doing this?
