Why do we have to do performance reviews?

When HR sends emails out saying it’s performance review time, do you dread it or do you welcome it? Is it a laborious process or is it a welcoming task?

If your experience is anything like mine, you dread those emails from HR and you procrastinate as long as you can before grudgingly doing it. However, have you ever thought about what the purpose of performance appraisal is? Because if it serves no purpose, then why are we doing it?

Here’re the 3 primary purposes of performance appraisal:

1. Distinguish the performers from the non-performers
2. Help people to improve or swap them out
3. A way to figure out funding (by systematically giving people’s salaries, raises and bonuses)

Now, let’s look at the current HR practices. Do they satisfy those 3 purposes?

1. Current HR practices focus on individual achievements instead of team achievements.
   1. Let’s define what “team” is first. A team is a group of people collaborating towards a shared common purpose. A group is where people cooperate with each other.
   2. In today’s business, you want a team of people to work with you instead of just a group of folks, and your measurements should reflect that. The top performers should not be heroes, they should be the ones who are best at collaborating with their teammates.
   3. The current practices drive a different behavior from what we want, so the data gathered is wrong. It cannot help us distinguish performers from non-performers.
2. Performance appraisals usually come once a year, at most twice a year.
   1. We don’t even remember what we did 2-3 months ago, let alone 6-12 months ago.
   2. To help people improve, feedback needs to be early and often.
3. Today’s performance appraisal helps organizations figure out funding by using the wrong information mentioned in #1 and then force rank people on a bell curve.
   1. If you have not heard of force ranking, it just exposes one of its flaws: lack of transparency. Even if you know what it is, unless you’re in senior level management, you are not privy to what happens during closed door force ranking sessions.
   2. It is also demoralizing and dehumanizing. E.g. you were told to “hire the best”. Yet, the “best” now has to fit into a bell curve.

While the purposes of performance appraisals are still valid, the current HR practices do not satisfy those purposes. Not only that, they demotivate employees and reduce business agility.

In the next post, we’ll explore how we can create a performance management system which satisfies the purposes and motivates employees. You can also join the free talk that I’ll be giving at the end of the month, titled “Daring you to open the HR pandora’s box“.

In the meantime, tell me about your experience with performance reviews. Do you dread it or do you welcome it? Do you agree with the listed purposes of performance reviews?