Performance management systems need fixing: Survey

Only six per cent of CEOs say their organization's performance appraisal system is useful

If HR practitioners want to improve their reputation with employees and CEOs, they’ll need to do something about performance management systems, according to a new study.

The survey of more than 48,000 employees, managers and CEOs from 126 organizations in the United States found that just 13 per cent of employees and managers — and only six per cent of CEOs — say their organization’s performance appraisal system is useful.

There is an obvious, and almost universally shared paradox when it comes to performance appraisals, said Mark Murphy, CEO of People IQ, the Washington-based firm that conducted the study.

“On the one hand, everybody does them. But on the other hand, everybody hates them,” he said.

Most people think performance management systems failed to add much value, but few people in HR will admit it, he said. “If your customers don’t like your product and your boss doesn’t like your product, this does not bode well for your long-term career success,” he said.

One of the messages emerging from the survey is that the process needs to be simpler and more efficient, said Murphy.

“There are two parts to the typical appraisal process. There is the filling in of the form and then there is the one-on-one conversation. The essence of performance management is really in that one-on-one conversation. The information in the form is simply designed to make that meeting more effective and more productive.” If a manager spends hours filling in forms and only talks with the employee for 15 minutes, then the system is inefficient, he said.

Another recurring complaint is that the appraisal reports aren’t personalized. “Employees get their appraisal report and they think, ‘This could have been written about 20 other employees.’” That suggests to employees that managers really aren’t taking note of what the employee accomplished during the year.

“Managers should have some system in place to record specific events. If the employee does a great job of something the manager has to write that down somewhere,” he said.

A survey conducted last year by Conference Board of Canada suggests HR professionals think the problem isn’t as bad as all that. Asked about the effectiveness of their performance management system, 40 per cent said their system is effective or very effective. Another 37 per cent said the system is acceptable and just 21 per cent said it needs improvement.

Many CEOs believe the flaw in performance management lays with line managers, not the systems, said Prem Benimadhu, vice-president, organizational performance at the Conference Board of Canada. “The issue is the bulk of managers are very reluctant to confront poor performance.” As a result, they end up giving everyone average assessments and average increases.

“It is not the systems themselves. It is the execution,” he said. “Managers are not assuming the right responsibility in terms of screening out poor performers. It is an abdication of responsibility.”

He also said the low score from employees isn’t that surprising. In an average organization only about 30 per cent of employees are more than satisfactory, he said. The rest are satisfactory or worse. “These are people who are not going to be happy with a system that tells them they are ‘satisfactory’ or ‘needs improvement,’” he said.

No matter how good the tools and systems are, some managers simply won’t do a very good job of managing performance, said Murphy.

In part that is because the process is so onerous and consuming. Managers invariably put it off for as long as possible. “They will start the weekend before, or even the night before; sit down and bang through them as quickly as they can. That just happens to be the reality of it.”

Performance management has to be more than an annual event, he said. Once a year may be enough to conduct the formal assessment and give a score, but feedback should be ongoing.

If it is just an annual event where no feedback has been given over the course of the year, performance reviews begin to feel like a trip to the dentist. “You pray you don’t have any cavities and get out of there as soon as possible.”

Allen Annett, a Montreal-based independent consultant specializing in organization effectiveness and performance management, said many performance management problems arise from an underlying organizational flaw. Annett served in senior HR positions with IMS Health, Zellers and Wendy’s.

By definition, performance appraisal systems assess how well an employee meets the expectations associated with the job. But too often the manager and employee haven’t even agreed on what the expectations and responsibilities are. When that is the case, the appraisal will always seem ineffective, he said.

And when it does come time to sharpen up performance management processes and systems, senior management must be prepared to dig in its heels because there will be resistance.

At one organization where he was heading up HR, the company decided to move from traditional, sometimes arduous, annual reviews, to less formal quarterly reviews. He knew there would be resistance to the change.

“I went to the boss and said, ‘Look, you have all VPs, why don’t we tell them if they are not doing it, they will lose 20 per cent of their bonus,’” recalled Annett. “If it isn’t going to hurt them, they are not going to do it.”

It took a few years to get everyone on board, and while nobody actually lost the bonus, (the CEO couldn’t do it, said Annett) a few foot-draggers received no salary increase because they were unable to implement the quarterly reviews, he said.

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