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SPECIAL REPORT on Performance Management
Plenty of managers and employees, and maybe some HR professionals, would love to attend a funeral for the dreaded performance review. At best, many regard the performance appraisal process as a meaningless annual rite that force-fits complicated human beings into simplified numeric or generic categories to fulfill an HR directive. At worst, managers abuse systems by inflating ratings of favored employees while deflating the accomplishments of others.
Employees and managers alike complain about the process being a tedious, biased, ineffective morale-buster. And where do they direct their grousing? The HR department. They see performance management as a process “concocted by the HR department and inflicted upon the organization,” says Dick Grote, founder of Dallas-based Grote Consulting, who specializes in performance management.
Grote chooses his words for maximum effect: By “concocted,” he means a made-up idea. And by “inflicted,” he means to impose pain on others.
Others share his sentiment: More than half of 556 human resource executives and line managers said they find little value in performance reviews, according to a 2007 survey by OnPoint Consulting, a New York-based HR firm. And a 2007 study of 2,200 employees by Salary.com found that more than 60 percent of workers say reviews don’t do anything to help their future performance.
Nearly eight in 10 companies conduct performance appraisals; of those, 72 percent reported being only somewhat satisfied, not very satisfied or extremely dissatisfied with the process, according to a 2006 SuccessFactors study of 1,000 HR professionals.
So why do three-quarters of companies have some kind of performance evaluation system in place when everyone is so unhappy with them? Because, for better or worse, HR professionals say, they still represent the best way to measure how an employee performs during a certain time period and the best way to determine how to help improve performance.
Also, in the legal reality of today, employers must defend themselves against unlawful termination lawsuits by providing documentation, usually a performance review.
In the face of such challenges, HR professionals have found ways to live with imperfect processes while at the same time striving to make reviews more accurate and useful.
The Rating Game
Anxiety. Fear. Nauseating. These were all words used by managers and employees to describe the dreaded performance review meeting. An employee has to have pretty thick skin to survive a one-on-one onslaught detailing all their wrongdoings during the past year. And, if the employee has no idea what the manager will say, the experience can be terrifying.
“Even surprise good reviews are bad because if employees don’t know they’re doing well, you’re not reinforcing that behavior, or you run the risk of losing a really good employee,” reflects Cindy Gerathy, HR manager at Belimo Aircontrols Inc., a Danbury, Conn., manufacturer of electrical actuators for heating, ventilation and air-conditioning systems.
Even a “good” rating can come across as “mediocre” to employees, especially with terms like “meets expectations,” “satisfactory performance” or “average.”
“We could do a better job of explaining that ‘meets’ is a good rating, and that we need those solid performers; those are the employees who get the job done consistently,” says Penny
Wilson, SPHR, director of corporate learning and development at Talecris Biotherapeutics Inc. in Raleigh, N.C.
But when the manager’s opinion is lower than the employee’s, tension, hurt feelings and defensiveness may occur. “As soon as you put two people in the room and one has to rate the other, it gets a little dicey,” says John Lewison, SPHR, director of human resources at MDRC, a New York-based policy research organization with 225 employees.
“No one wants to be rated average,” says Lewison, “so, on a scale of 1 to 4, everyone ends up in the 3 category. Most people agree they aren’t superior, but most people think they’re above average.”
Lewison balks at companies’ attempts to change the rating scale or terms of evaluation.
As for terminology tweaking, Lewison says with a laugh, “Oh, I’ve worked for six companies, and I’ve seen every word used for every category. And no matter what you do, people figure out pretty quickly what ‘average’ is and don’t want to be in that category.”
Lack of communication compounds problems with scales and terms. “Companies keep trying to change the process to improve it, and usually, there’s no communication around why they are changing it,” says Lisa Wotjkowiak, client relationship manager in the Employee Engagement Practice of Opinion Research Corp. in New York. “Employees and supervisors get disenchanted.”
Because of previously in-vogue practices of forced distribution and bell-curve rankings, employees and managers may conclude that only a few spots are available for the top rating—and that if one person on the team gets the top score, there’s no room for another “star” player.
“While there’s nothing in our system that says you have to have a certain percentage of ratings in each of the categories, managers believe they have to force-fit people,” says Wilson. “The joke is, ‘It’s not your turn to receive “exceeds expectations” ’ [and that] they rotate who gets it that year instead of evaluating the person.”
What qualifies a person for that elusive top rating also confounds employees. “Employees believe that perfect scores are not attainable, no matter how good they are, and that’s a problem for motivation,” says Wotjkowiak. “Managers need to discuss with employees what they are doing well and what they need to do to reach the highest rating.”
Managers say performance reviews are no fun. They’re “one of the harder aspects of being a manager,” says Jennifer Loftus, SPHR, national director at HR consultancy Astron Solutions in New York. “When I had to do reviews that were less than stellar, I had knots in my stomach.”
Lewison agrees: “You don’t mind sitting down with employees if they’ve done great work and have walked on water all year and have done all the things you’ve asked. But if you have to tell someone that they’re ‘satisfactory,’ which is a euphemism for ‘average,’ then it’s difficult. Because no one thinks or wants to hear that they’re average.”
Hearing that message comes especially hard if the employee was given no indication about performance throughout the year. Providing feedback and documenting performance takes time, a resource managers have in short supply. Managers don’t want to take the time, says Janis Porter, SPHR, manager of human resources at MDRC. “Our [performance appraisal] form takes thought, and if you haven’t taken time to meet with your employee throughout the year, then you will get stuck at the end.”
And, managers certainly don’t want to add to overloaded schedules. “Managers won’t rate ‘below expectations’ because they would be required to do a ‘work plan for success’ and meet on a weekly basis and document improvement,” Wilson says.
HR managers see appraisal systems misused by managers who decide the rating first and then try to justify it. “Managers use it as a compensation tool rather than a performance management tool,” explains Kathy Wall, executive vice president of HR and organizational development at MediCorp Health System in Fredericksburg, Va. “They’ll say, ‘I need to keep this person, so I better give him or her a high rating so that this person gets a good raise and stays.’ But they don’t have good data to support the ratings.”
Getting managers to provide “for examples” in reviews becomes a challenge. “I’ve seen reviews that aren’t as concrete as they could be,” says Loftus. “The feedback is, ‘good job’ or ‘good worker.’ The reviews aren’t specific or actionable, and they don’t tell me how I can get the top rating.”
This may have to do with overcomplicated forms. Appraisals “are unwieldy and have section after section after section,” Loftus says. “And if a manager has to do, say, 20 of these reviews, this can add up to a large amount of time.” If HR professionals hear complaints from several departments, they should streamline the process, she advises.
Managers often complain about lack of time. Wall says MediCorp, with 4,000 employees and plans to add another 500 in the next six months, conducts first-quarter performance reviews—when facilities flood with patients. “One nurse manager may have 80 to 100 people under her. It’s hard for those individuals to get performance attention during that time,” says Wall.
To get a big picture, HR professionals need to assess all complaints. Are they about ratings or process? HR professionals should send back complaints about ratings to managers, insists Grote. “With complaints about ratings, HR mistakenly feels it should listen to both sides, be neutral and judge who is right,” he says. “That is a mistake. That is why so many line managers lose respect for HR. It is not HR’s job to be neutral and unbiased; it is to be the advocate for the organization. If the employee complains that he is ‘exceeds expectations’ and he got a ‘meets,’ then the HR person should say, ‘Go back to the manager and ask what you need to do to be an ‘exceeds expectations.’ ”
Despite constant communication, Wilson struggles with the “it’s not my turn to receive the highest rating” assumption by many at her company. “I don’t know that we have overcome this sentiment,” she says. “We tried educating our managers and employees about ratings, but it doesn’t seem to translate. Because employees know that our system feeds into pay increases and bonuses, they complain if the rating will mean a lower payout.”
Restructuring the Process
If compensation muddies performance review waters, some experts suggest severing the two. “I’m seeing more companies do that,” says Wotjkowiak. Those companies include Belimo Aircontrols, where salaries constitute a separate discussion, says Gerathy. A separate goal document tied to bonuses is completed at a different time.
Grote says complaints about ratings are often more about managers’ feedback, rather than the actual ratings.
Some companies are implementing midyear or quarterly check-ins or devising processes that require more-continuous feedback. “If you’ve given feedback throughout the year, the rating should be just one more meeting that isn’t a surprise to anyone,” says Wilson.
MDRC began implementing a midyear review. “It’s a check-in meeting with goals and to shore up on anything before the end of the year,” says Porter. “We wanted to stave off the end-of-year shock.”
YMCA of Greater Rochester, N.Y., has received its share of complaints about reviews from employees and managers. “The managers felt the process didn’t help their employees with their development and didn’t provoke conversation,” explains Fernan Cepero, PHR, vice president of human resources at the 2,900-employee organization. “From the employees’ side, the process was a check-in-the-box exercise where they felt they had no input, no say. Neither party looked forward to it.”
To promote dialogue, HR has injected a self-evaluation step.So far, the reaction has been positive. “Employees feel they have a valid voice and a say in the review and the process,” says Cepero. “Supervisors feel a burden lifted because they are getting feedback from employees.”
Jay Poulsten has been on both sides as an employee and a manager at YMCA. He says self-evaluation allows employees to give examples of what they have done well and to request training. Now an associate executive at Carlson Metro YMCA, Poulsten manages three full-time and 100 part-time employees. “Now, the rating isn’t determined before employees get in the meeting. It’s more of a discussion between the supervisor and the employee.”
However, the solution has drawbacks.
“People will overrate themselves and get angry and cry if their manager doesn’t agree they should get an ‘exceeds expectations’ rating,” says Wall.
The opposite can also be a problem. “For some of us, it’s very difficult to boast about our accomplishments,” says Wilson.
Some HR professionals recommend having employees list their accomplishments rather than fill out official appraisal forms. Grote says having employees fill out an official appraisal form can lead to misunderstanding. “The employee feels he has written his appraisal and my manager has written his appraisal of me. So the purpose of the review meeting is to slap the two together and come up with something we both agree on. That’s not right.”
What Are Performance Reviews?
Organizations spend millions of dollars hiring consultants, buying systems, tweaking forms and conducting training to fix what ails performance reviews. All these efforts are misguided, concludes Dick Grote of Grote Consulting. Most believe “performance appraisal fails because of the forms or the procedures are wrong, or the managers don’t know how to have the conversation,” he says.
“All of those are true but secondary to the cause. The primary reason [it fails] is that people don’t understand what the appraisal is.”
So what is a performance appraisal? “It’s a formal record of a supervisor’s opinion of the quality of an employee’s work,” says Grote.
“The operative word is ‘opinion,’ ” he explains. “Opinion does not mean subjectivity. The magic phrase in any performance appraisal is ‘for example.’ As long as a manager can back up his opinion, it is an objective appraisal. If the manager has been paying attention to the employee all year, then it is not subjective because he has seen the performance of the employee with his own eyes.”
Rate, Then Calibrate
Increased oversight from upper managers and HR professionals also improves review processes. Many organizations use calibration meetings as a way to ensure consistency among performance reviews and manager ratings.
Grote explains calibration this way: “Remember in college and you had professors who were easy graders and professors who were hard graders, and everyone knew who was who?
That’s fine in college, but it’s not OK in the workplace when it impacts compensation and promotions and who gets chosen for a layoff.”
In the last few years, companies have asked Grote to lead calibration sessions as a third-party adviser. Before these sessions, each supervisor fills out performance appraisal forms and comes up with suggested ratings. Then, a group of supervisors, usually in the same division, reviews everyone’s ratings.
Grote designates a flip chart for each numerical rating and assigns each supervisor a different colored Post-it note pad. He then asks the supervisors to write the names of their employees on notes and stick the notes on the flip chart of the ratings they would like to give. “Because of the different colors, you see pretty quickly which supervisor is an easy grader and which is a hard grader and which one always goes for the middle ratings,” he notes.
Grote also advises supervisors to use the full width of the flip chart so if one employee is a solid “meets expectations,” the Post-it note goes in the middle of the chart. But if another employee is a “meets” on the border of “exceeds,” then the Post-it goes toward the right edge of the chart. This creates a healthy dialogue among managers about what constitutes “exceeds” vs. “meets.”
“You get managers in other departments talking about this one employee,” says Grote. “It exposes talent to a much larger group of managers. In addition, it motivates the manager to work really hard to justify the ratings of his employees because he knows they may be subject to debate in the calibration meeting. The disadvantage is the added layer of administration, but I think even managers would agree that it’s worth it.”
Wall introduced calibration about two years ago. In addition, “We started requiring a second-level sign-off for higher ratings for our manager level and above,” she says.
At Talecris, directors first sit down with managers to review ratings. The functional head looks at all the ratings and does calibration to determine whose ratings remain and whose change.
“It also gives us and managers extra support if an employee does complain about his rating,” says Wilson.
After the reviews are in, an HR audit should be conducted to help ensure fairness of ratings and thoroughness of reviews and to spot coaching and training needs for managers and employees.
“We look to see if some areas are giving all high ratings or low ratings,” says Wilson. “We then speak to the manager to see what we can do in coaching or training in performance appraisal to help [achieve balance].”
At YMCA, the chief operating officer and Cepero review each performance review. “It’s a signal that this process is important to the growth of the organization,” says Cepero. “We look for signs that this is the first conversation the supervisor and employee have had. We’ve had to go back and say, ‘Tell us more; flesh it out.’ ”
“We increased coaching of all our managers on performance reviews and on how to give consistent feedback throughout the year,” adds Gerathy, who uses a personality profile instrument to help managers understand their employees’ learning styles.
Don’t Plan the Funeral Yet
No matter how much people complain about doing performance reviews, employees, managers and organizations still need them.
“Performance management is like budgeting: It’s required in every organization, it’s cumbersome and onerous, it never comes out exactly as you planned, and managers always whine,” says Grote. “But you would never get rid of budget planning just like you should never get rid of performance appraisal—because no matter how flawed the process is, it’s good business practice.”
Lewison says, “We’ve talked to people who contend that performance reviews are dead and that there are better ways to manage. But the fact is, we still need to set expectations and manage them, and this is still the best way to do it.”
The author is a contributing editor and former managing editor of HR Magazine.
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