Why the performance appraisal is a joke

Performance Appraisal

Never been a big fan of the concept of the performance appraisal. It makes no logical sense to me. If a company rolls out a new product or so-called ‘strategy’ and that product/strategy is bombing a week or so later, the CEO is going to be calling meeting after meeting with his lieutenants. If they’re not all based in the same city, you can bet some flights are being booked ASAP.

So in short: we evaluate customer-facing strategies literally every few days, but we focus on the performance appraisal — what, once a year max?

I’ve written about this stuff a little bit before, although I used the term ‘performance review’ as opposed to ‘performance appraisal.’ Here’s a few examples:

The dirty little secret of anything related to the concept of a performance appraisal, of course, is that it’s all a giant cover-your-ass move: in the modern era, most companies use performance appraisal to either (a) get someone out the door or (b) keep someone at the same salary level for years. If someone is a really high-achieving, top-flight performer, the performance appraisal means almost nothing — and I think we all know that. That person will get their perks and scratch without the formal processes necessary, while the rest of us wallow in the deep end of “Well, your task achievement could be a bit better…” In a way, it’s all reams of bullshit on top of each other.

How much bullshit, exactly? Let’s talk about some research from Wharton.

The magic number in performance appraisal: 27

Let me try to set all this up for you. Let’s say an employee has the same manager for 2-3 years, right? Then let’s assume — as many executives do — that the good/great people in their org are always good/great, and the bad people are always bad. OK.

So if good is always good and bad is always bad, and employees are sticking with the same managers … then we should be able to explain 100% of scores. Next year’s performance appraisal scores should always be identical to this year’s scores in this set-up.

Now of course, the number won’t be 100% because nothing in business is perfectly predictable.

So Wharton went and did this research — what percentage of scores can we predict from previous performance?

After the research was done, they talked to different people in businesses about the expected result. People in Human Resources guessed 80%. Execs of companies guessed around there too.

The real answer? (Drum roll, please.)

It’s 27%.

That’s way closer to zero — i.e. no connection between one year and the next — then to 100 — i.e. total connection between one year and the next.

And right there, you see how ridiculous performance appraisal truly is.

Why are the performance appraisal scores so all over the place?

There are different reasons given by Wharton above, but here’s what I’d add:


Over-taxed managers: If you’ve ever had a job with a set time of year for performance appraisal, you know everyone hates it. Managers bitch about it more than anyone. “Ain’t got time for this shit! I’m looking to please my bosses, not evaluate my subordinates!” At one gig I had, a manager with 14 direct reports called someone in from HR. He tells the HR lady, “I know who my 5s are, and I know who my 1s are. Give everyone else a 3.” That guy in that situation made about $330,000/annum base. He was higher than a middle manager, for sure. But 14 span of control and targets to hit, so he couldn’t be bothered to deal with this performance appraisal crap. The problem is, the HR lady didn’t go quite along with it and made him evaluate each person while she sat there. He rifled through it — so 5s from last year got 5s, but a couple of 4.1s from last year got 2.5s just because this dude was rushing. That’s where you get the 27 percent number above — and that 4.1 who dropped to 2.5 probably didn’t have a bad year. It’s just a mix of the manager being over-taxed and probably the 2.5 guy had a bad week and that’s what the manager was remembering.

Subjective context: Same deal as what I just said. Let’s say your company does performance appraisal in October, right? You hit targets like a fiend for 11 months and then in October, your wife goes into labor and you rush out and miss a deadline or something. If you’re a 4.5 on a 1-5 but your boss is a target-hitting ass clown, he’ll remember the rush-out more than the 11 months. As a result, your 4.5 is now a 3.0. This happens all the time, because business is all about what have you done for me lately and not really about looking at holistic, macro things.

Domain of HR: Performance appraisal is the domain of HR. As a result, execs don’t care about it. Most execs won’t HR to be like a small child — seen and not heard. Be present so people know not to send dick pics, but don’t ask for a seat at my revenue table, goddamn it. Most companies do not empower HR, and so things tied to HR are rush jobs or done with no context — hence there’s literally no predictive context between one year and the next.

The Bad Employee Myth: All this logic rests on the idea that there are ‘bad’ employees and ‘good’ ones. Nothing could be further from the truth. There are ‘human beings’ in good or bad fits with their environment/surroundings/department/direct boss. It happens all the time where some employee switches from Boss A to Boss B or Role C to Role D and suddenly becomes much better, well-liked, and respected. Now, yes, some people are dicks, assholes, and/or totally incompetent and unprofessional across the board. (Many of these people become executives if they decide not to leave a place.) But it’s a giant myth that you’re either ‘good’ or ‘bad’ at your job. A job is a mix of so many different elements and people that shoving someone in one specific box is comical.

… and that’s the crux of why performance appraisal is a joke. What if we had companies talk to their employees frequently? Or encourage managers to do so? Take the pulse of their org, so to speak? What if we moved it away from a once-a-year process and made it something akin to talking to your friends, or posting to Facebook, or cooking dinner with your spouse? Sure, the analogies are a bit fraught here and there — but the point is, current performance appraisal is a stilted, slow-moving, infrequent, no-context joke of a mess of a process. Can’t we do better than this?

Ted Bauer

Reply If You'd Like