To martyr yourself to caution/ is not going to help at all / because there’ll be no safety in numbers / when the right one walks out of the door

[Lost for Words, Pink Floyd]

Every year, around March-April there is a flurry of mails from HR reminding people to complete their appraisal inputs. Team members are exhorted to fill in their self ratings by the deadline, and then managers are hounded by HR to complete their ratings of their teams. A few days later all the managers are invited to a day-long meeting to do the dreaded ‘curve fitting’- since the logic goes that ratings of individuals on teams no matter how good or small should fit a normal distribution. (Those meetings can sometimes turn violent too when the fitting doesn’t go too well) Weeks later the ratings are communicated to the employees and that’s when the resignations start. A popular joke goes that moving companies record their maximum revenue for the year in the weeks right after annual appraisals are completed in companies.

This scene is all too familiar in the corporate world and every HR professional dreads it. Let’s face it: The process of annual appraisals is broken and desperately needs to be fixed. Once a year is too long a period in today’s fast paced workplace. Some companies have tried to mitigate this by carrying out the exercise twice a year. But the process remains the same and so does the limitations. And to make matters worse employees feel that perceptions, unfortunately, play a large role in this evaluation model.

Consider an imaginary (but typical) performance appraisal scenario at WidgetCo (a fictitious company):

WidgetCo is a large technology company, where thousands of engineers are hard at work making sure their widgets are the best in the world. On the fourth floor of the ten floor building occupied by the company, in the software division we run into a quiet but more than competent engineer (let’s call her Anita).

Anita’s primary job is to deliver flawless code in Java that fixes the customers problems which she does.  Annual Appraisal Rating: Meets Expectations.  She is rated 4 on a scale of 1-5 but pushed down to 3 in the ‘curve fitting’ process.

She is reserved and does not speak up frequently in team meetings unless it deals directly with a problem in her domain. Annual Appraisal Rating: Needs Improvement

Anita also has a passion for coding in Python and often helps the testing teams debug complex automated testing scripts. The guys over in that department are in awe of her coding skills. In fact she is first person all team members turn to for help. Her inbox has more than a dozen ‘Help!’ mails every single day with a couple of dozens of ‘Thank You! You saved my life’ mails as well.

Annual Appraisal Rating: No rating, because her manager has no clue.

Overall rating for Anita: Meets expectations, but there is need for improvement. Her salary will rise by around 6% and performance linked variable pay will be around 50% of the maximum. Guess what Anita is going to do when her appraisal rating email arrives in her inbox?

Let’s take a second to look at the ‘bugs’ (as Anita would have put it) in the above appraisal process:

  • The annual appraisal happens too late.  In today’s workplaces employees want continuous feedback.
  • Forced ‘Curve fitting’ is not a good idea, especially in companies with many smart people.
  • Managers tend to have large teams and cannot possibly know all their team members well. Perceptions inevitably creep into the annual appraisal process and this is never a good thing.
  • It is impractical to expect a manager to evaluate a whole years worth of work in one go and that too of several dozen people at the same time. Fatigue is bound to set in and this opens the door for incorrect assessments.
  • Employees find positive and constructive feedback the most motivating. The very construct of a once-in-a-year forced appraisal system goes against this.

In their research paper titled ‘Studying microscopic peer-to-peer communication patterns’, Peter Gloor et. al. collected data of employee interaction at a bank using social badges (body-worn sensors). What emerged is a fascinating map of how a face-to-face network (verbal communication pattern) might differ vastly from the e-mail interaction network (non-verbal communication). In the maps they obtained there were people who were highly central in one network while on the periphery in the other. e.g. a manager who might be central in the face to face network, but peripheral on the email network and therefore unaware of what transpires between team –members on a daily basis.

Technology is available today that can actually help companies overcome this problem. Appraisal processes can become transparent, use real time data and overcome bias and perceptions that are inadvertently introduced by the existing methodology. With the advent of social networks, there is merit in trusting the ‘crowds’ with the appraisal process.

Wisdom_Of_Crowds_In his book The Wisdom of Crowds, James Surowiecki narrates an anecdote about the statistician Francis Galton. As the story goes, in 1906, Galton observed a competition at a country fair where the bystanders had to guess the weight of an ox.  Eight hundred people entered the competition and Galton, being a statistician, couldn’t help collating data and analyzing it. Though individual guess were far off, the average was just 1lb off the actual weight of the ox. The crowd might actually be able to tell you something the experts can’t.

Introducing a social recognition platform provides a public forum for the employees to recognize and appreciate their peers. The peer-recognition (and other recognition awards) can then be easily incorporated into performance reviews and incorporated into the final performance ratings. Doing so introduces a high level of transparency (especially at the team-member levels) and democratizes the process.

So what is the potential cost of sticking with the good-old appraisal process? In their report, ‘Tracking global trends’, Ernst & Young, point out demographic shifts that are transforming the global workforce. In the section where the report talks about the ‘power of the individual to spur innovation’, it says

Through the new possibilities for “social listening,” businesses are able to better understand what their customers and employees need and want.

More change can be expected when the generation that has grown up with new technologies and instant information gratification joins the workforce. For example, by 2014, Gartner forecasts that social networks will become the main form of business communication for 20% of employees worldwide.

Global employers are now facing a challenge of having to recruit from a shrinking workforce due to an aging population in a majority of the developed countries. With an increasingly mobile and aware workforce, holding on to talent in your organization will become tougher.

It’s time to be bold and make the change happen. The last thing you want to do is face up to the nightmare of having to lose your star performers because you were clueless. As Pink Floyd put it so well: ‘To martyr yourself to caution is not going to help at all’

References and acknowledgements:

  • Tracking Global Trends: How six key developments are shaping the business world (Ernst & Young)
  • Studying Microscopic Peer-to-Peer Communication Patterns, Gloor et.al., Americas Conference on Information systems
  • Image 1 courtesy of FreeDigitalPhotos.net, Image 2: Cover of book ‘The Wisdom of Crowds’, James Surowiecki, ISBN: 978-0385721707

3 thoughts on “Annual Appraisals: It’s time to move on!

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