Author: Fabiola Eyholzer

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Companies excel at calculating ratings. They judge, force rank, provide infrequent and limited feedback and assess outdated, obsolete, and irrelevant goals. And then wonder why appraisals are so despised! Forget performance ratings and annual appraisals. Instead create a culture of mutual respect where candid dialogues, continuous feedback, knowledge sharing and learning is an integral part of the workflow.

Employee appraisals are considered a management tool to evaluate results, give valuable feedback, and identify opportunities for learning and growth. And performance ratings are a way to guide the discussion and differentiate performance.

Sounds like a great thing. So why do more and more companies join the ranks of those who eliminate employee ratings? The decision to go new ways usually starts with the realization that despite the time, money, and energy spent (investment), the outcome (return) is unsatisfactory.

Over the years, appraisals have taken over the whole Performance Management process and derailed the focus from vision, goal alignment, and performance to calculating recognition. The system has become so finely tuned to the rating part, that it leaves little room for anything else. In fact, employee appraisals has become a synonym for performance rating.

And we all know: the higher the rating the better the cash incentive. So we fill out hordes of papers to get the number just right, even if that means tweaking certain categories to the get the desired outcome, while selling it as objective assessment.

At the same time we fool our employees and ourselves in believing there is a guaranteed and immediate link between ratings and promotions and salary increases. Even though these decisions are not purely driven by individual contributions and achievements. Economic situation, succession planning and corporate climate have just as much to do with it. Individual managers usually have limited control over that, but are the ones making promises to that end.

It is no wonder that in most organizations, employee appraisals are no longer about assessing performance in order to be able to learn and adapt, but to calculate salaries and estimate career steps, leaving behind the appraisal part. The bulk of the discussion is on getting the rating rate to ensure the “correct” reward.

By doing so we spend valuable time explaining away a number and negotiating a delta in performance with highly valuable employees. We have lost sight of what is important: give purpose and meaning, provide a platform for growth and greatness, and unlock intrinsic motivation.

The situation gets even direr when companies apply staked or forced rankings. Which are supposed to help different performance and ensure to get a favorable spread along the high to low achiever scale. But more than not simply leave employees demotivated and undervalued.

In other words: we judge people, we force rank them, we provide limited feedback and on top of that we rate them on goals, that are most likely outdated, obsolete, and irrelevant. And then we wonder why everyone has ambivalent feelings about appraisals?

Some of it lies within the definition of appraisals. Appraisals are “the act of estimating or judging the nature or value of something or someone.” Which in itself is not a very stimulating and engaging way to approach and deal with cherished employees. Such discussions are definitely no fun – no matter whether you are on the giving or the receiving end. It often puts people into a defensive position and chances are they will view the appraisal as unfair and blame their superior for being unjust and biased. And they are right.

Of course ratings are flawed and impartial: they are highly subjective, differ in quality and recent events account for more than accomplishments that were achieved earlier in the year. Over the years, organizations have tried to master it by imposing more sophisticated rating models. But no matter whether it is a 5, 7 or 9 point scale or done by several people in a 360 degree approach – it remains a ranking conducted by human beings.

However, subjectivity in itself is not an issue at all. There is nothing wrong with having different opinions – quite the opposite. It is one of the key ingredients for innovation and growth. And who says two people can’t have an honest and valuable discussion on achievements and development potential and leave the meeting energized and eager to move forward, instead of demotivated and weary?

That does not mean, that we shy away from hard discussion. Agile teams proof that daily. They are used to be held accountable for their actions and results. They showcase, get evaluated, and learn and adapt – not only on an individual level, but as a team and organizations. They are not afraid to move forward and make chances to the system. But the discussion is focused on the right outcomes, relentless improvements, and continuous learning.

Agile enterprises eliminate traditional performance ratings and employee appraisals and instead create a stimulating performance culture based on mutual respect and trust where open, honest, and candid dialogues and continuous feedback and self-reflection, as well as transparency, knowledge sharing, continuous learning and relentless improvement are an integral part of the workflow.

This article is part of the series “How Lean | Agile Enterprises Push the Reset Button on Performance Management”

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This post was contributed by Fabiola Eyholzer, CEO of Just Leading Solutions, LLC. More information about Fabiola, Agile HR and the services of Just Leading Solutions can be found at www.justleadingsolutions.com.