Performance appraisals usually don’t work very well as workplace communication tools yet often work extremely well as grist for litigation.
In my 25-plus years of employment law practice, performance reviews have surfaced on numerous occasions. Every once in a while, they help the defense. Usually, however, it’s the plaintiff who benefits. That’s because performance reviews are frequently untimely and inaccurate.
Sometimes, they’re more negative than reality, but most of the time it’s the opposite. Rather than confronting employees, managers duck the performance or conduct problems by giving “false positive” performance reviews, which later come back to haunt them.
The Demand Letter
Consider the following hypothetical. A plaintiff’s lawyer carefully crafted his letter to the company’s president: “Dear Sir: Your company recently fired my client, Joe Smith, because of his age (54) and because he filed a workers’ compensation claim three weeks before his discharge. We therefore call on you to rectify this unlawful action by reinstating Mr. Smith with full back pay and benefits, compensation for emotional distress, and payment of attorneys’ fees and costs incurred. Very truly yours, Ernest K. Barrister.”
The reply came from the company’s law firm. On embossed letterhead with long columns of attorneys’ names in both margins, it said: “Dear Mr. Barrister: We are in receipt of your letter on behalf of Mr. Smith. Please be advised that his claim is utterly baseless. He was fired for three compelling reasons: incompetent performance, abysmal attendance and chronic bad attitude. Please be advised that should you pursue such a blatantly frivolous claim, we will seek sanctions from the court against both your client and you personally. Govern yourself accordingly. Sincerely, Snidely J. Whiplash.”
Undeterred, Barrister filed a lawsuit. It was met by a blizzard of paper, as defense counsel filed motions seeking early dismissal of the claim. Nonetheless, the lawsuit survived into the discovery phase.
That’s when the game changed.
Following production of documents from the employer, the plaintiff’s attorney deposed Smith’s former manager. After listening to a detailed description of the plaintiff’s alleged performance, attendance and conduct deficiencies, Barrister handed the manager a document and said, “Sir, this has been marked as ‘Plaintiff’s Exhibit No. 1.’ It appears to be a performance appraisal given to my client two months before his termination and prepared and signed by you. Is that correct?”
“Yes,” the witness replied.
“Let me direct your attention to a section on the review titled ‘Work Proficiency.’ Ratings range from ‘Poor’ to ‘Outstanding.’ You checked the box ‘Outstanding.’ Is that correct?”
“You checked the same box under the category of ‘Attendance.’ Is that correct?”
“Further, this same box is checked under the category of ‘Teamwork.’ Is that also correct?”
“I assume, sir, that ‘Outstanding’ as defined in the appraisal form means outstanding in a good way, not in a bad way. Correct?”
A smile began to spread across the attorney’s face. “Well, then, based on your previous testimony about my client’s supposed incompetence, unreliability and toxic attitude, what you filled out on this performance review must mean that you tell lies. Isn’t that correct?”
Barrister’s smile got wider. “So, I guess we have to sort out when you’re lying and when you’re telling the truth, don’t we? Assuming, of course, that you ever tell the truth.”
“Objection!” Whiplash shouted. “Counsel is badgering the witness!”
“OK,” Barrister replied, chuckling softly. “I guess we don’t really need to sort out your witness’s lies today. We’ll let the jury do that for us.”
You probably know what happened next. A settlement check with a considerable number of zeros soon found its way to Smith.
As an HR professional, you’re no doubt aware of how inaccurate reviews often put HR professionals at odds with operations managers. They want to take an action they believe is necessary for the organization, such as firing a problematic employee, but their position is contradicted by the personnel files. You then get the unenviable task of holding up a stop sign because of excessive legal risk.
This problem was exacerbated by the Great Recession and its aftermath, when managers felt increased pressure to reduce workforce size to a core of the best employees, yet failed through the years to effectively communicate and document who belonged in that category.
Given rampant problems with timeliness and accuracy, it is not surprising that performance appraisals are often viewed unfavorably by people at all levels of organizations. The April 21, 2010, Financial Post reports on a survey conducted by management consultant Chuck Bolton. In it, 87 percent of employees found traditional performance reviews to be ineffective and 94 percent of chief executives responded in the same way.
In a recent book, Samuel Culbert calls the performance review a “corporate sham” and uses language like “insidious,” “damaging,” “pretentious” and “bogus.” The University of California-Los Angeles management professor concludes that performance reviews produce “absolutely nothing that any thinking executive should call a corporate plus.” Not surprisingly, the title of his book is Get Rid of the Performance Review! (Business Press, 2010).
In my view, Culbert fingers the wrong culprit. He blames the problem on “power-grabbing HR executives who opportunistically use the performance review to elevate their department’s stature. Take away the annual performance review and the HR department is back where it should be: supporting management rather than supplanting it and terrifying it.”
In numerous interactions with HR professionals about performance appraisals, I have not seen evidence of Culbert’s charge. Rather, I have heard HR professionals repeatedly lament the problems with reviews and express frustration that they aren’t more useful in supporting management.
So, is it time to jettison performance reviews altogether, as Culbert preaches? Possibly. But before doing so, spend some time studying the admitted minority of employers whose performance feedback systems are effective.
Several examples have been shared with me where employers have experienced positive return on investment from their performance feedback systems. Two I’ll mention here are Zions Bank and Savage Cos.
Zions First National Bank. Headquartered in Salt Lake City, Zions Bank has 2,700 of the 10,500 employees in Zions Bancorporation and has offices in 14 states. In 2008, Zions Bank adopted an initiative on performance management. It centers on “WIGs” and “PIGs.” The former stands for “wildly important goals,” while the latter stands for “pretty important goals.”
George Myers, senior vice president for HR at Zions Bank, explains that WIGs represent the most-desired results from employees, departments and the overall organization. PIGs are identified because certain things still need to get done even if they’re not at the heart of what’s desired.
Under the program, supervisors meet with their teams on a weekly basis to discuss progress on WIGs. On a monthly basis, supervisors meet separately with each of their employees to discuss individual steps needed to progress toward their WIGs and other development goals. Performance feedback is given, but, as Myers emphasizes, the primary focus is on the path ahead.
In 2010, Zions assessed employees’ reaction to the program and was astounded by the results. In a survey of nearly 1,000 employees:
91 percent said the process helped develop their job skills and knowledge.
85 percent said it assisted in their career growth.
92 percent said they had their supervisors’ “ongoing support and recognition.”
Savage Cos. Headquartered in Salt Lake City, the family-owned international transportation and materials management group has more than 2,000 employees and operations in many North American locations. Savage uses the SLDP—Savage Leadership Development Process—which combines relationship building with competency assessments to provide feedback to employees.
As explained by Howard Goodman, senior vice president of people development, employees fill out a personal profile worksheet, take the Hogan Personality Inventory and then receive feedback on performance related to specific competencies that the company values. SLDP seeks to develop supervisor-employee relationships that achieve business goals and stimulate individual employee growth and well-being.
According to Goodman, quarterly one-on-one reviews are critical to the process. Every manager—from a front-line operations supervisor to Savage’s chief executive officer—holds meetings with each of his or her direct reports. At the meetings, expectations are discussed and clarified, and progress is assessed on business and personal levels.
Regarding return on investment, Goodman reports that in addition to a low incidence of workplace legal claims, the company has done extremely well regarding industry benchmarks on retention, productivity and similar criteria. One telling statistic: Despite the ups and downs of the transportation industry, Savage has enjoyed a 15 percent annual compound growth rate over the past several years.
From Zions Bank and Savage Cos. to other examples cited by HR professionals, five basic attributes distinguish effective performance reviews:
User-friendliness. Effective performance reviews cut out the clutter and focus on what’s most important. Supervisors don’t have to struggle through a labyrinth of overlapping and ambiguous categories and subcategories. Instead, the review creates constructive dialogue where the feedback centers on the most important behaviors connected to the most desired results.
No surprises. Performance feedback is not “saved up” and dispensed in an annual report card. It should never be a substitute for real-time feedback. Goodman explains, “At Savage, if you have a problem with an employee, you don’t wait for a performance review to address it. Instead, you use a performance improvement process that focuses separately and specifically on problem-solving, on a real-time basis.” Whether it’s a monthly process like Zions’ or a quarterly one like Savage’s, effective performance reviews involve setting clear goals and expectations and then reviewing them for accountability.
Consistency across the organization. Myers and Goodman emphasize that virtually everyone is engaged in Zions’ and Savage’s feedback systems. Supervisors can’t opt out. As Goodman says, “The quarterly reviews have become part of our culture.”
Scrupulous honesty. No “white lies.” Employees are entitled to know exactly where they stand with management. However, this doesn’t mean the review should be characterized by excess negativity. Feedback should include positive aspects of an employee’s performance as well as areas that need improvement.
Forward-looking. Zions’ and Savage’s executives discourage supervisors from seeing themselves as teachers dispensing report cards and assigning ratings on a bell-shaped curve. Rather, they encourage supervisors to see themselves as coaches striving to improve employees’ future progress and satisfaction. Myers states, “Too often, management treats the performance review like a rearview mirror.” Although it makes sense to periodically look at what’s behind you, he says, it’s not a good idea to drive your car while looking only through your rearview mirror. “Instead, we emphasize keeping your eyes on the road ahead.”
Zions, Savage and other employers show that performance feedback can be given systematically and effectively. The process takes effort, commitment and leadership support. But as Goodman, Myers and other HR professionals will tell you, the return justifies the investment.
The author is a shareholder with Ogletree Deakins in Portland, Ore., and author of The Star Profile: A Management Tool to Unleash Employee Potential (Davies-Black Publishing, 2008). Write him at email@example.com.