Vol. 45, No. 10
Although far from perfect, performance appraisals remain valuable. Here are ways to make them even better.
Performance appraisals have been getting negative reviews as of late. In fact, some individuals claim that performance appraisal systems are so fundamentally flawed as to be manipulative, abusive, autocratic and counterproductive.
If such labels are indeed accurate, the ineluctable conclusion would be to chuck the process altogether. A number of management gurus have come to this very conclusion and have called for the outright abolition of performance appraisals.
But such a reaction is far too strong—and, from a legal perspective, problematic for employers. Performance appraisals provide so many important legal and other benefits that employers should be loath to part with them entirely. (See “The Benefits of Performance Appraisals” on page 200.)
This is not to suggest, however, that there exists no room for improvement. Those who criticize performance appraisal systems raise valid and useful observations about a process that is undeniably imperfect.
But let’s not throw out the appraisal with the bathwater. Such an approach would be inconsistent with the fundamental elements of HR. After all, when there are weaknesses in employees’ skills and performance, we do not auto- matically toss them out on the sidewalk. Instead, we try to maximize their potential, reduce their weaknesses and build on their strengths.
It seems reasonable to do the same with the very tool we use to evaluate those employees. Rather than doing away with it entirely, why not evaluate the performance of our performance evaluation system, with an eye toward improving it?
Discourage Teamwork/ Collaboration
A major and valid criticism of appraisals is that they tend to discourage collaboration. Performance appraisals undeniably focus on individual achievements and, therefore, produce self-focus rather than a team focus. This is particularly problematic in organizations that embrace Total Quality Management, of which teamwork is an important component.
But this problem can be fixed: If collaboration is essential, make it a criterion on which employees are evaluated. Appraisals that focus on—and reward—collaborative behavior will encourage teamwork. Conversely, appraisals that punish employees for working contrary to the team (e.g, withholding information) discourage anti-collaborative behaviors.
The problem, then, is not an endemic part of the performance appraisal system, but rather a function of how we use it. As seen above, appraisals can actually encourage teamwork.
Further, employers that do away with appraisals altogether, or that fail to focus on teamwork in the evaluation process, actually take on more legal risk if they later take adverse action against employees who do not display the desired teamwork skills. When employers do not clearly communicate the requirements for success (or how employees fail to meet those requirements), any subsequent discharges will lack adequate foundation. That leaves the door open for employees to claim that the adverse action was based on illegal discrimination.
Critics also contend that appraisals are inconsistent. Evaluators often apply the same criteria in different ways or give different weights to the same criteria.
However, a good performance appraisal instrument increases the potential for consistency by ensuring that all similarly situated employees are evaluated on the same criteria. The abolition of appraisals increases the likelihood of inconsistency (and discrimination claims) by eliminating this common benchmark.
That being said, the critics are not entirely wrong—appraisals should be more consistent. This is a legal as well as a business imperative.
One way to improve consistency is to provide training for supervisors. For example, supervisors who plan to give subordinates a negative ranking should be taught to ask themselves: “Does any other employee whom I supervise have the same or a similar deficiency?” If so, the employee in the current situation should receive the same or a similar ranking.
In addition, where feasible, HR should review a draft of all supervisors’ appraisals before they are finalized. This gives HR an additional opportunity to focus on the consistent application of the appraisal’s criteria.
Human resources also should look for patterns on appraisals that may suggest conscious or unconscious bias. Clearly, rooting out such bias early, perhaps before it has an effect on employees, is advantageous from both a practical and a legal standpoint.
The review by HR also can help avoid the plaintiffs’ lawyer’s dream: overevaluation of the substandard performer shortly before termination, which then makes the subsequent performance-based termination appear pretextual. In other words, if the draft appraisal does not reflect concerns previously expressed by the supervisor about the employee. HR can send the appraisal back for a re-evaluation.
Employers also may wish to consider evaluating all their employees at the same time each year (as opposed to throughout the year on employees’ anniversary dates). When evaluations are done at the same time, supervisors are more likely to apply consistently the same criteria or factors.
Valuable Only at the Extremes
Another criticism is that the appraisal process has value only at the extreme ends of the performance scale, for those who are exceptionally able or exceptionally poor performers. Critics claim that it is impossible to quantify precisely degrees of difference between acceptable levels of performance.
Even if the critics were correct and appraisal processes truly were this limited, they still would have tremendous value to employers. Why? Because most employment decisions are made not in the middle, but at the extreme. Performance appraisals can help justify promotional decisions for extremely good performers. And they can be equally helpful, if not absolutely necessary, when deciding whom to lay off. It is with regard to these situations that the appraisal is of critical value, if performance is to be the primary consideration of appraisals in setting the foundation for subsequent employment decisions. (Conversely, in the absence of appraisals, there are no clear benchmarks to distinguish among employees. In the absence of such benchmarks, subsequent promotional and layoff decisions are easier to attack.)
The value can be accentuated by including a comparator question in the appraisal instrument. Such a question might ask the following: “Is the employee’s overall performance generally stronger than, the same as or weaker than others performing the same or similar tasks?”
This comparator question can be particularly useful in situations where supervisors rate all their subordinates as meeting expectations. The question forces supervisors to assign a loose ranking among subordinates who are performing satisfactorily, but to different degrees.
Finally, it should be noted that the appraisal is not without practical value in between the extremes. If sufficient detail is provided in the comments, the appraisal provides a map for middle-of-the-road employees by showing what they need to do to increase their standing within the organization or to avoid falling below expectations.
Another concern is that appraisals tend to encourage employees to achieve short-term goals. When this occurs, prudent risk taking is dangerously discouraged.
Undeniably, appraisals can focus employees on meeting short-term goals. But, once again, the problem is not with employees’ reactions but with the focus employers establish.
As with collaboration, the key is to incorporate this value into the appraisal process.
Accordingly, the appraisal instrument should include both short-term and long-term goals for decision makers. Those who excel at one but not the other are not meeting expectations.
However, this solution does bring a potential risk because some employees may construe long-term planning to be a guarantee of long-term employment. Employers can minimize this risk by ensuring that all employees sign an application for employment with at-will language and that no express or implied guarantees are made in the appraisal process.
How do you achieve this? To be safe, when discussing long-range plans, always focus on the company, the department or the product line—not the employee. (For example, it is legally safer to say “How should this process work in three years?” rather than “How will you be running this process in three years?”)
This strategy will minimize—but not avoid—the legal risk. The only way to completely avoid legal risk is to avoid discussions of long-term plans, which is a greater risk.
With regard to encouraging prudent risk taking, supervisors may wish to ask subordinates prior to the appraisal for a list of innovations that they tried but that failed. If a subordinate has not failed, then he or she has failed.
Further, the appraisal process should be dovetailed with the compensation program. If we want appraisals to encourage employees to go after more than just short-term goals, we need to consider long-term commitment and planning when making compensation decisions.
Abolitionists see appraisals as wretchedly autocratic. The argument is that the supervisor has all the power in a supervisor-dependent relationship.
But removing the appraisal process will not change the balance of power. With or without appraisals, supervisors will judge their subordinates and through that process they will mold their behavior.
Further, eliminating the appraisal process will remove one of the few concrete mechanisms management has for measuring and checking a supervisor’s use of power. Rather than eliminating the behavioral manifestation of management’s power, we should make sure this power is not abused.
More specifically, one of the criteria on which supervisors should be appraised is how they appraise their subordinates. Supervisors are less likely to abuse their power or abdicate this responsibility altogether if they know that their professional growth hinges on how they manage and evaluate their subordinates.
While the appraisal process cannot be entirely equal, it should not be entirely one-sided either. It’s a good idea to ask employees for their comments on their appraisals. This can help supervisors get a better idea of how employees perceive themselves; it also may be valuable if litigation later ensues.
After employees are discharged, they sometimes argue that their performance was substandard because they had a disability the employer did not accommodate or they were subjected to harassment that interfered with their ability to function effectively. When employees raise these concerns after being terminated—but fail to raise them on the appraisal instrument itself—their credibility suffers.
Employee comments should not be limited to written form. There should be an open dialogue between the evaluator and the employee evaluated. Too often the evaluation process is a paper process, not an interactive one. If the process is interactive, employees are more likely to understand their evaluations and supervisors are more likely to understand subordinates’ perception of their evaluations.
There is a potential downside to encouraging increased spoken interaction, however: Because not every interaction between employee and supervisor is captured on paper, employees and their supervisors may easily disagree about what was said and how it was expressed. This can increase risk in litigation. However, this risk should be more than balanced by the potential gains of conducting a valuable, interactive performance appraisal.
Critics also contend that appraisals are too subjective. There is no question that appraisals are necessarily subjective, but we should not eliminate the process because of this subjectivity. Rather, we should acknowledge that there is substantial subjectivity in appraisals, particularly at senior positions. We should then include safeguards to make sure this subjectivity is applied in a defensible way.
Employers can minimize the inherent but necessary risk of considering subjective factors by measuring achievement in terms of specific behaviors. In other words, employers can increase the objectivity of the appraisal process by focusing on specific employee behaviors, as opposed to general personality traits that flow from those behaviors.
This is an easier standard to articulate than it is to apply. To help supervisors apply this standard, give them guidelines to help them focus on the specific behaviors that are relevant to the criteria they are applying.
For example, we can all agree that adaptability is essential to the success of an HR professional. In measuring whether an HR professional is sufficiently adaptable, we would want to look for specific behaviors that either confirm or contradict the employee’s ability to:
- Deal with ambiguity.
- Shift gears quickly.
- See the big picture quickly.
- Make decisions without “perfect” information.
- Value diverse ways of handling problems.
Produce Emotional Anguish
Another concern about appraisals is that they produce emotional anguish—that employees worry about the process and are devastated by the results.
Employers should be humane with their appraisal processes and should minimize the adverse emotional impact on employees. As a result, appraisals should be conducted on time. The longer employees wait, the more anxious they become. Further, criticism should be delivered in a constructive, non-punitive way.
At the same time, we shouldn’t avoid appraisals out of fear that some employees may not like what they hear. We should motivate employees to achieve excellence, not coddle them so that they are content with mediocrity.
To the extent appraisals create anguish in those that don’t meet expectations, that’s not a bad thing. It may stimulate them to leave on their own initiative. And employees who leave on their own are less likely to sue.
The critics of appraisals make good points. The problem is where their criticism leads them. It is easy to call for the abolition of something that is flawed. The problem is that the alternative is worse.
It is far more difficult to find solutions—even imperfect ones—but this is not new ground for HR. Just as human resource professionals strive to give subpar employees the opportunities, guidance and training that may help them become productive workers, they also must work to improve the systems that appraise those employees.
It may not be easy, but it is worthwhile. And it is necessary if we are to derive the legal and other benefits that appraisals can provide, when they are structured properly.
Author’s note: This article should not be construed as legal advice or as pertaining to specific factual situations.
Jonathan A. Segal, Esq., is a partner in the Employment Services Group of Wolf, Block, Schorr and Solis-Cohen LLP, a Philadelphia-based law firm. His practice concentrates on counseling clients, developing policies and strategic plans, and training managers to avoid litigation and unionization.