Second only to firing an employee, managers rate performance appraisals as the task they dislike the most. In fact, neuroscience research has shown that providing negative performance appraisal feedback causes actual physical pain to both the employee and the manager. The reality is that the traditional performance appraisal as practiced in the majority of organizations today is fundamentally flawed, and incongruent with our values-based, vision-driven and collaborative work environments.
The practice of giving employees annual ratings or performance evaluations is widely accepted as an essential and valuable tool throughout the business world. Amazon offers over 200 titles focused on this topic, with more than 50 published since 1994.
Most employee performance reviews are annual processes, where the manager annually assesses the work of subordinates. In some cases, the employees also participate in self-review. In many organizations, annual salary increases are tied to the performance appraisals ,and often as well, according to one study, managers often delay completing them because they are not motivated
Robert Sutton, Stanford University professor, says that performance evaluations do more harm than good. A 1998 study by Development Dimensions Incorporated, found that employers themselves expressed overwhelming dissatisfaction with performance reviews. The consulting firm, People IQ, in a 2005 national survey, found that 87% of employees and managers felt performance reviews were neither useful nor effective. . In an article published in The Psychological Bulletin, psychologists A. Kluger and A. Denisi report completion of a meta-analysis of 607 studies of performance evaluations and concluded that at least 30% of the performance reviews ended up in decreased employee performance.
Tom Coens and Mary Jenkins, in their book, Abolishing Performance Appraisals: Why They Backfire and What To Do Instead, detail studies that clearly show performance appraisals do not work and outline what could replace them. Garold Markle, in his book, Catalytic Coaching: The End of The Performance Review, argues that performance reviews have reached the end of their utility and should be replaced with a manager-employee coaching system.
Aubrey Daniels, a world renowned management consultant, argues in his book, Oops! 13 Management Practices That Waste Time and Money, that performance appraisals don't work and are actually counter-productive. Daniels cites a study by the Society for Human Resource Management (SHRM), which found that 90% of performance appraisals are both painful and don't work; and further, produce an extremely low percentage of top performers.
Charles Jacobs, author of Management Rewired: Why Feedback Doesn't Work and Other Supervisory Lessons from Brain Science, says that the brain is wired to resist what is commonly termed as constructive feedback, but is usually negative criticism. Brain science has shown that when people encounter information that is in conflict with their self-image, their tendency is to change the information, rather than changing themselves. So when managers give critical performance appraisal feedback to employees, their brains' defense mechanisms are activated, and the motivation to change is improbable.
Samuel Culbert, writing in the Wall Street Journal, and author of Get Rid of the Performance Review! How Companies Can Stop Intimidating, Start Managing--and Focus on What Really Matters, says that "it's time to finally put the performance review out of its misery," adding, "this corporate sham is one of the most insidious, most damaging and yet most ubiquitous of corporate activities." Culbert argues that the performance reviews "instill feelings of being dominated. They send employees the message that the boss' opinion of their performance is the key ingredient of pay, assignment, and career progress."
Clearly, the annual performance review was designed for a work environment where control of individual employee performance was a key function. In today's team and collaborative environment, that perspective no longer makes sense. Some key questions that need to be answered are: Why are we perpetuating a system that research (including recent brain research) shows is not only ineffective, but counterproductive; and what are better processes to replace the performance review?