Performance appraisal
•Download as PPTX, PDF•
0 likes•554 views
Performance appraisal what it is not
Recommended
More Related Content
What's hot
What's hot (7)
Viewers also liked
Viewers also liked (15)
Similar to Performance appraisal
Similar to Performance appraisal (20)
Recently uploaded
Recently uploaded (20)
Performance appraisal
- 1. PERFORMANCE APPRAISAL What it is anyway?
- 3. • Almost everyone have tried doing this from 1970s • Huge industry • Seems very logical Performance Management The Origin
- 4. The reality • Managers tend to rank everyone in the middle • Here comes the bell curve • Rank & yank
- 5. “83 %of organizations believe their pay-for- performance programs are only somewhat successful or not successful at accomplishing their goals.”
- 6. of managers are dissatisfied with their PM systems95 % of HR heads believe they do not yield accurate information90 % of CEOs recognize their talent practices are not working93 % of HR managers dislike their own review systems58 %
- 7. Performance appraisal causes drop in productivity and lawsuits in Microsoft, Ford, Conoco, Goodyear
- 8. “It leads to employees focusing on competing with each other rather than competing with other companies.”
- 9. The percentage of companies reporting that they used a forced-ranking system declined from 42% to 14% Institute for Corporate Productivity, 2011
- 10. “You would think that having so many smart people try thousands of variations of a [ranking] scale over decades, someone would have found the right way to do this, but no one has.” Dr. Brian Kropp
- 11. Why?
- 12. Brain reaction to performance appraisals SCARF model, David Rock, Neuro-Leadership Institute
- 14. The only one person feels neurologically rewarded by the PA exercise: the senior executive who oversees it.
- 15. EXTRINSIC INCENTIVES BIAS Monetization driver is dangerous
- 16. INFORMATION & SIGNAL Output is easily measured, quality problems are readily detected, and blame is assignable
- 17. SELECTION & TALENTS ATTRACTION Often, of the wrong kind
- 20. from fairness and accuracy of information feedback39.1 % from risk taking38.9 % from bonus & base raise~3 % from emphasis on weakness-26.9 % Impact on performance
- 21. Compensation • Market competitive • NO, it doesn’t help your low performers • Immediate recognition • Culture, working environment, learning opportunities & tools
- 22. Rethinking PA • In-depth/structured conversations • Focus on result evaluation • IN or OUT • Induce growth-mindset • Goal settings & continuous feedbacks • Using result/behavior matrix
- 23. How to boost performance by 30%
- 25. Date Topic Content Key Questions Month 1 Climate review Job satisfaction, morale and communication How would you rate your job satisfaction/morale/communic ation? Month 2 Strengths & talents Effectively deploying strengths and talents What are your strengths & talents? How can they be used in future roles in the organization? Month 3 Opportunities for growth Improving performance and standards Where are opportunities for improved performance? How can I assist you? Month 4 Learning & development Support & growth What skills would you like to learn? What learning opportunities would like to undertake? Month 5 Innovation and continuous improvement Ways to improve efficiency & effectiveness What is ONE way you could improve your own working efficiency? What’s ONE way we can improve our team’s operations?
Editor's Notes
- Typically: Employees are rated by someone else Performance is linked to extrinsic motivation Over a long period of time (a year) Score are kept by someone else
- And there is even a huge industry for performance appraisal. This is also the result of the fear of losing control when company grows, which is the leaders’ primary concern.
- At first, managers were required to rank employees, typically in a 1-5 scale. Soon, many companies discovered that managers tended to rate everyone in the middle. To understand why, read this quote from an executive from a large food manufacturer (with a 1–5 rating system) explained, “Anything other than a 3 requires extra work for a manager. You have to justify it if you give an employee a 1 or 2, and you have to put the employee in a performance improvement plan if you rank them 4 or 5.”
- http://www.strategy-business.com/article/00275?gko=c442b
- After years of implementation, Microsoft finally dropped the performance appraisal system in 2013. The system is also credited for the fall of Microsoft the past 10 years.
- The forced ranking & rank-and-yank scheme which made famous by Jack Welch (GE) were also suffered from a lot of criticisms. It’s rarely work. For example, in the 1980’s, Xerox invented the LISA computer. The windowed user interface was the basis of both the Macintosh and Windows operating systems, but in so as far as Xerox was concerned, it was sold off at bargain rates as a technology incompatible with Xerox’s future plans. So those employees that produced the product could well have ended up in Jack Welch’s bottom 10%. Managers & leaders tend to think a lot about compensations & incentives. These efforts typically involve “aligning the interests of the executive officers with the long-term interests of the company’s stockholders”. But what does your hired consultant tell you? Does he/she say with the right structure, you can boost performance?
- The mere act of introducing number triggers negativity. http://www.davidrock.net/files/NLJ_SCARFUS.pdf Why? Let’s consider this: Status: Anyone except number 1 is a lower status Certainty: No one can predict the ranking. The ranking is fixed on the past, it’s hard to judge potential future Autonomy: It’s hard to make people feel they’re in control of their ranking. Relatedness: in-or-out group “Two weeks before my review, I begin to prepare my attack.” Fairness: 75 percent of the respondents believed performance systems were not fair.
- No matter what how you label people and assign them a number, it will eventually hurt their feelings. This is because of self-enhancement effect.
- Let’s do a test: I will rank all my bosses instead.
- We think people have more extrinsic driver than we are. Incentives doesn’t last long anyway. Many companies don’t even have sale commission. Money talks also means more cheaters. Survey by Kaplan Educational Centers say 64 percent of respondents they pursuit a career in law because it is intellectually appealing. Only 12 percent think their peers are similarly motivated. 68 % of executives has bonus plan because senior management believe such rewards would motivate executives. All of them say they don’t make daily business decisions based on how much that decisions would affect their bonus. Well of course they can do that if the metric is simpler enough. Doesn’t guarantee they’d be happy though. Incentives effect doesn’t last long. After 1 month, it’s just somebody’s salary, it becomes expected. Try: Talking with people. SAS (1.3 bils, 98% of customer renewal rate) – have sales target, but only to keep score – they just tell people the objectives Let employee see the value & benefit of their work. Show customer satisfactions, how they saves lives, etc Let people join because of missions, technology, and culture. Reward less – just the right amount – so it’s a celebration – but yet meaningful. Worry about distribution & comparison
- Conflicting messages, use KPI Use only everything is so clear If I have used the KPI, I will not fix the bug that I fixed, and I will not help IT. Organization, sadly, usually sends on conflict messages to employees. For instance, pay attention to quality, but also cut cost and increase efficiency. Or deliver faster, but also keep high quality. Each job actually has multiple dimensions, and people can’t care about them all, so they’ll look at the pay system to know what to do. For e.g., a company pay employees for every time the company is ranked in the top of the on-time performance. This is not just motivational, it tells people that the company cares about on-time performance. What is the most crucial factors that determine airlines that fly on-time? It’s actually whether airline executives seem to care about flying on-time or not. For example, a freight forwarder offer praise for improvement. On the first day, the proportion of packages placed in large containers increase to 90%. So by simply letting people know that they are doing is important already has profound effect. Financial signals are not always what you want. For instance: sale-man is paid on revenue generated and by not standing around waste of time. Sale-man may turn down customer simply because he conclude customer unlikely to purchase outright, and because he’s paid on commission. The customer finally bought the car from another dealers, who emphasizes on customer service instead. However companies are interested in generating sales over the long period of time. Wind shield installs: if broken, must stop and fix until done before start anything new. Employees work independently. It’s easy to track productivity. Unfortunately, for most organizations, this is not reality. People will simply trick the system to their advantages. For e.g. pay truck drivers to finish routes early – causing more accidents. Pay for less serious crimes – classified them as less serious crimes. Furthermore, we can never know all of the dimensions in a complex product. Must use data analytics to get something right. KPI should only be used when there are clear, simple, agreed-upon measure that makes cheating almost impossible, and we don’t care how people get there, just the number is enough. When output is easily measured, quality problems are readily detected, and blame is assignable
- Conventional wisdom: If you don’t reward performance, you can’t attract best & most ambitious people. – See the Power of Incentives – Edward Lazear – “Pay that is only mildly related to output can be very powerful in sorting workers and providing information”. However, consider James Treybig’s opinion: He believes that capital is the most fungible resource, hence he insists on people & communication. (James Treybig - Best CEO http://www.bizjournals.com/austin/print-edition/2012/09/28/best-ceo-awards-special-achievement.html?page=all). He was the CEO of Tandem Computers, Inc. was the dominant manufacturer of fault-tolerant computer systems for ATM networks, banks, stock exchanges, telephone switching centers, and other similar commercial transaction processing applications requiring maximum uptime and zero data loss – later becomes part of HP. This company do not tell people about the salaries before they were hired, even at most senior executive levels. They only tell their salaries is competitive. If they insist on the precise number, they would not get the job. Random survey on brokers: (1) company doesn’t treat them well, can throw them away any second, (2) they can leave anytime they want, company needs them, not the other way around. What’s kind of culture is that? Study of law student: The students in the focus groups were quite clear that they would stay with the firm until their student loans were paid off or greatly reduced, and then leave. And, indeed, this particular law firm lost more than 50 percent of its associates by the end of their third year of employment, which was precisely the point The effect is visible in law schools – most of the tuition is so high – student will work in firms that pay well, but long hour, just to pay their student loan. So they quit after about 3 years, just when they pay back their loan and start being productive enough for the firm itself. If we’re in war for talents because of money, then they will always go to another better places. Money is actually the most abundant resources, are we competing because we have more money? Furthermore, when money is the concern, people are likely to cheat. There is a experiments that show, students choose a subject in order to make more money, cheats more than students who choose the subject out of interests. It’s well-known that, business students cheats more than engineering students, beware!
- Talorism is wrong Only work if employees have enough capability & information. What’s the basic assumption here? Incentives seem to be the primary tool for aligning individual behaviors with organizational objectives, and without incentives, people would do nothing! This can be traced back to Talorism, with assumption that people must be bribed with pay to work, to the point that “basic to the effective functioning of any organization is its pay and reward system”. Corner stone of the personnel economics is that workers respond to incentives, and that people behave based on the value of the outcomes. This has been proven wrong. ----- Incentives has motivational effect: people will work harder to achieve a greater financial reward. See, “work harder”. It means their effort, not their ability. This only works if people have enough information to perform and if other organizational systems & technologies are not the primary roadblocks to poor performance. So without system redesign, information sharing, or upgrading people’s skills, this will not work. Further more, swing in performance is not always under the control of people. Florida Power & Light: compensation is based on profitability, profitability is based on mostly on temperature. Who can control the weather, huh? So it will work only, if the control is at the employees, and they actually have the capability to do that. If these 2 assumptions doesn’t hold, it will not work. Otherwise, the damage is huge. This is the point that is stressed repeatedly, but seem to be forgotten – see “The man who discovered quality”
- This is a study from Corporate Leadership Council, 2013, analyze 105 factors which impact high performance. The data consists of 19,000 managers & nonsupervisory employees, across 7 industries, 29 countries. The result is remarkably consistent across industries, segments and countries Fairness and accuracy of information feedback (39.1%) Risk-taking (38.9%) Emphasis in performance review on performance strengths (36.4%) Understanding of performance standards (36.1%) Good internal communications (34.4%) A manager who is knowledgeable about performance (30.3%) Opportunity to work on things one does best (28.8%) Feedback to improve job performance (26.2%) The implicit message from employees is, "Let me work on tasks that interest me," then, "Tell me the standards you expect," and, "Encourage me and let me know how I am doing." http://www.thestreet.com/story/10819746/2/improving-performance-the-innovators.html 100. Forced ranking 101. Increasing the number of formal reviews 102. Emphasis in informal feedback on personality weaknesses 103. Emphasis in appraisals on personality weaknesses 104. Emphasis in informal feedback on performance weaknesses 105. Emphasis in appraisals on performance weaknesses. NOTE: Training itself is also ineffective, except IT industry.
- This is how Google do it (pay-scale) What about the non-performers? How did the board, leadership and fellow employees feel about a low performer getting the same increase as a top performer? The answer was simple. Compensation is not the way to handle low performance. Low performance is a management issue and the presenters said that Google has strong commitment to managing employees in a way that moves them out of roles where they aren’t successful and making sure that low performance isn’t tolerated.
- Result/Behavior matrix: Journeyman, Star, Failures, Lovable Losers, Prima Donnas.
- People to get rid of: (From Robert Sutton’s study) Deadbeats (withholders of effort) Downer (pessimism) Assholes (violate interpersonal norms of respect) Research shows team with just 1 bad apple suffers performance disadvantage of 30%-40%. Well, and we save the cost.