Executive Coaching
Performance appraisals valuable only if they are conducted properly
Most of the organizations with whom I consult have some version of a performance appraisal process. Many have a process in place in theory, but the implementation of the process has a great degree of variability. When employees tell me how performance appraisals are used in their organizations, it is apparent that businesses are not aware of abuses of these processes or are not training their employees in the purpose of the measurement and how to use it. They are also not aware of how manipulation of the measurement process undermines productivity.
A performance appraisal yields information for several reasons. One reason is to allow the business to make decisions about promotions or merit pay increases. Another reason is to provide for developmental improvement in employee job skills. What business can afford to not develop its employees?
Even though performance appraisals are sometimes used to determine increases in merit pay, it is not recommended to give the performance appraisal at the time that salary increases are expected. In some cases, especially in government or the non-profit sector, additional money may not be available for merit increases, so employees may view the appraisal as a waste of time. If there is money available, employees may seek to inflate ratings because of a desire to get a salary increase. If this is the case, the use of an appraisal as an honest evaluation of behavior for developmental purposes is hampered and the interaction between supervisor and subordinate can become contentious.
When funds for pay increases are limited, some supervisors tell me they have been told to manipulate the rating process to reflect business finances. If a rating scale has a range of 1 to 5, with 5 being the highest score, they are told to keep the number of employees rated above 3 to a minimum. Other supervisors tell me they only rate employees in the middle range, because if they rate employees above or below the middle range they are required to document high or low performance and this takes up more of their time.
Restricting ratings to only a few of the measurements on the scale is a measurement error called “restriction of range.” In this case, the purpose of the measurement has been lost. The measurement no longer reflects the behavior of the direct report, but now reflects the supervisor’s time constraints or the financial concerns of the business. The credibility of the evaluation process is greatly diminished and productivity suffers. Employees tell me, “Why should I do a good job? Why should I care about my work? No one will acknowledge it.” Decreasing an employee’s ratings artificially creates serious consequences for the supervisor.
This manipulation of the evaluation process is comparable to altering the results of a medical diagnostic tool based on the availability of funds to treat the health problem. None of us thinks we should refrain from reporting the instances of disease because of our inability to provide the services or funds to treat it. We believe that a person has a right to an accurate report on their health. Measurements of performance at work carry the same ethical requirements. A performance appraisal with someone’s name on it should always be about the person.
The performance appraisal process should be an integral part of a business’s mission, vision and strategy. Managers should be trained in using the process appropriately to meet the developmental needs of the business. This one tool used effectively can improve employee relations, productivity, and employee satisfaction. It allows a business to acknowledge good performers and weed out the poor ones. Who doesn’t need that?