Should We Abolish Performance Appraisals?

Performance appraisals impede genuine feedback, and there’s no solid evidence that they motivate people or lead to meaningful improvement. In fact, they usually produce distorted and unreliable data about the contribution of employees. Consequently, the resulting documentation isn’t useful for staffing decisions and often doesn’t hold up in court. Too often, appraisal destroys the human spirit and, in the span of a 30-minute meeting, can transform a vibrant, highly committed employee into a demoralised, indifferent wallflower who reads wanted ads on the weekend.

This isn’t just our opinion. A survey by the Society for Human Resources Management found that more than 90% of appraisal systems are not successful. Hundreds of other studies and surveys also support the gross inadequacies of performance appraisals.

In large part, appraisals fail because the very notion of rating people clashes with human nature. The overwhelming majority of people view themselves as excellent performers. In fact, 80% see themselves in the top quarter of all performers. Telling them otherwise is deflating, not motivating. People see mediocre ratings as a lack of appreciation. Supervisors realise this, and this is why most are so reluctant to conduct appraisals.

Perhaps the greatest incentive for performance appraisals is their value in determining raises, bonuses and promotions. However, benefits to people who receive greater-than-average-awards are usually short-term and have little impact on improving their value in the organisation. More important, these awards are de-motivators to the rest of the organisation.

Changing Pay Practices

If your organization has some form of merit pay, it’s absolutely essential that you start with education. People have all sorts of illusions about their own performance, the performance of others, and the employer’s ability to measure performance. We recommend initiating a work team to examine how the current system drives performance. Let them come to their own conclusions about appraisals, about the role of financial awards, about motivation and de-motivation. Give this team the time to investigate these matters. Once the team has a firm grasp of pay and motivation issues, they should develop a report to educate upper management. All key executives must be open to this information. The team should be sufficiently well-prepared to argue their points before the executives.

Having addressed de-motivation and getting the payout of the way, a remaining function of appraisal still needs to be addressed: without the appraisal, how can we foster a highly motivated workforce? Start by realizing that you don’t motivate people. Motivation is the desire someone has to do something. However, organizations can do a great deal to foster conditions that bring out the best opportunities for people to be motivated. It’s crucial that the organization helps enable employees to find meaning in their work. Meaning is the only true intrinsic motivator. Meaning leads to joy.

Meaning as a Motivator

We now present three approaches to developing a highly motivated workforce: create a compelling vision, promote and provide interesting work, and create a climate of teamwork.

Create a compelling vision. To find meaning, people need to connect to the service or product of the organization, not the financial statement, though certainly, that is important. People need to understand how their work connects to the organization as a whole. Any employee, at any level, should be capable of taking someone on a walking tour of the business and be able to generally tell how each unit contributes to the ultimate product or service. This requires an investment in people.

Promote and provide interesting work

People will be energized and motivated if they are doing work that feels worthwhile and is interesting to them. Everyone’s interests are different, but here are two strategies in helping people find interesting work.

Give people freedom and choices in their work

All managers need to understand the power of giving people trust and freedom in doing their work. This means finding ways to be more fluid and less structured, allowing people, as much as possible, to choose work that aligns with their individual interests and strengths.

Part of this shift is establishing practices and writing policies that give the employee the right to independently exercise discretion and judgment. The trends towards flex-time and self-managed teams further illustrate ways of giving people choices and space in their work.

Offer people challenges

Many people yearn for and thrive on having challenge in their work. This can be provided by offering people more responsibility and the opportunity to learn new skills and grow in other ways. This does not necessarily come from career advancement opportunities—the greatest opportunities are in the day-to-day fluid approaches to jobs.

Providing new challenges is not a quick fix for everyone, however. Some people are content to do a good job without novel challenges, just knowing they contribute to a worthwhile service or product. Others may be at a particular point in their career or personal life where new challenges are not desired, even though they are happy to give you a good performance every day.

These differences in individual outlook obviously point to the need for employees to be self-reflective and choose what works best for them. Involving people more in decisions also provides interesting work and motivation. Despite the continued hype over the importance of money and recognition, more people are motivated if their ideas were heard and they have opportunities to apply them.

Create a climate of people working together

In so many ways, conventional organizations emphasize the individual—individual goals and appraisals are examples of this. Instead, foster ways for people to work together, to share meaning, and connect with one another. There’s no better time to promote collaboration and working in teams than when you are moving away from appraisals.

This “connected” environment is not achieved through team-building alone, but requires a fundamental shift in management. The focus must shift away from blaming individuals for poor outcomes to seeking to understand the causes, systems, and processes that drive performance. This is best achieved when employees collaboratively work together to solve performance issues confronting their work unit and the organization.

Make it fun

Give it a Contest or Game “feel.”

To some, these initiatives toward meaning, interesting work, and collaborative teams may feel like lofty and unrealistic ideals. But, at an increasing rate, these kinds of initiatives are taking hold and radically transforming work, with great business results to boot. As this connection to meaning is strengthened, people are finding greater joy in their work. And motivation abounds.