Copyright © 1996-1998. Ethan A. Winning All Rights Reserved
Some months ago, I attacked the criteria used by many companies in their performance appraisals. Now that I've gotten that off my chest, I'd like to turn my attention to the timing of performance reviews.
In the past, I've used systems which had three, six, nine and twelve month review periods. While many I would hope most still have a three month (end of introductory period) evaluation, thereafter most companies have gone to annual reviews perhaps primarily and initially as a cost saving device. While I subscribe to this method I do not necessarily subscribe to the methodology.
The annual review is still used for performance evaluation as well as for the possibility of giving an individual a merit increase. (Actually, the merit increase part is what has been emphasized.) Evaluating performance has taken a back seat to the form and format. So, one might properly conclude that there is a difference between a review and an appraisal, and where many companies are falling down is in the area of appraisal.
What's wrong with an annual review? For the past thirty years we have recognized at least three problems with all evaluation systems: the horns effect; the halo effect; and the effect of central tendency. The first two are also known as "recency" effects.
Briefly, the horns effect states that an individual who is due for review and screws up royally just before a review, is going to be appraised negatively. The halo effect is just the opposite: an individual who hasn't been doing a great job for eleven months does something spectacular just before his review is rated positively.
Interim (six month) performance reviews are at least one solution to these problems. Sure, interim reviews will probably be met with complaints from supervisors and managers. Performance reviews are a pain in the neck and they are time consuming. They are also absolutely necessary if the evaluation system is to be rational.
These complaints can only come from a misunderstanding or lack of understanding as to the value of performance appraisals. All too often organizations simply foist the process on managers since it has always been part of the managerial process. Unfortunately, even the historical reasons for having the process may appear trite: "It gives the employee a chance to openly discuss his or her performance." "It tells the employee where he or she stands" relative to other employees or at least in the opinion of the supervisor. And so on.
These reasons are valid, no matter how hackneyed they may seem. It is not that employees cannot wait a full year to be evaluated. It is that the company needs to know on a more than annual basis how its employees are performing. Otherwise, "pay for performance" (talk about hackneyed) is for lip service only.
Go back to your school days. You were given quizzes, a midterm, and a final exam. The "final" was given up to half the weight in the total evaluation, but at least you were "evaluated" along the way. For the sake of both the company and those in an annual review period, there is a real need for a sixmonth (interim) appraisal. It lends credence to the "final grade."
We could properly call this a "benchmark review." How is the employee progressing toward "ultimate" objectives? Is he on track, or is more training needed? Is the supervisor providing this training? Is the supervisor monitoring performance, giving guidance, and counseling the employee? OR, do we have to wait a year to find out why the company isn't meeting its objectives? (When employees meet their performance goals, it has a "trickle up" effect.)
Modified forms are probably needed for an interim review. Those of you who have been following this column for a time know that I developed several new appraisal forms, one combining exempt and nonexempt reviews. These are six pages long and, although I gave supervisors and managers plenty of checkoff boxes, I still require written explanations and examples of "outstanding" and "marginal" performance. Further, two pages focus on planning (goal setting) and achievement of goals. The modified form reduces the six pages to three, leaving only the scored check box section with fourteen criteria.
One might not expect a hew and cry to be heard about a second review and new form, but boy did we get complaints! So, in order to gain acceptance, I had to make the process as easy as possible.
Sometimes I forget that commitment starts with acceptance, and acceptance is not a matter which can be commanded. Programs and processes must be sold, first to senior management, then from the executives to the supervisors and then to the troops. (Keep reading. I cover my tracks later.) In terms of performance evaluations, the troops don't have to be sold: it is the managers who have to be convinced that this is in their best interests and the interests of the company.
Why is ongoing appraisal in the best interests of the manager? This question presupposes that managers are truly accountable for the actions (performance) of their subordinates. (Yes, Virginia, there are still "subordinates." No, they are not "partners." Such universal empowerment would lead, not to the impossible democratization of industry, but to corporate chaos.) Too often, the last responsibility we think of when we think of managers is supervision. Unfortunately, it is often the last thing the managers think of. (Few things make managers and supervisors sweat and/or steam more than getting a note from Personnel saying, "Claudius' review is due.")
But, if managers were to be held accountable for the productivity of subordinates, then appraising performance along with counseling and guidance, would be in the best interests of the managers. One way to hold managers accountable is to key their profitsharing or bonuses or plain old increases to the performance of their departments. The performance of the company is then logically keyed to the performance of departments.
To complete this circular argument, as the individual goes, so goes the department; as the department goes, so goes the company; as the company goes, so goes the individual. Companies, rational companies, do not wait until the end of a fiscal year to see how they did. At the very least, they appraise or evaluate how they're doing on a quarterly (sometimes monthly) basis. If organizations evaluate on a morethan annual basis, isn't it equally logical that individual performance should be measured more than annually?
If these arguments fail to impress, then there is always the reasoning that, without documentation of performance on a regular basis, the legal pitfalls in discrimination, termination, and layoffs should be of sufficient concern to force ongoing performance evaluation.
While commitment comes from acceptance, and our initial attempts to gain endorsement must be based on persuasion, blatant coercion can be an effective tack. As a consultant, I can't use intimidation, but the executives in a company certainly can. My advice: cut out the sale of the idea to the managers. Sell it to the president, and he or she can scare the hell out of the managers. It's beginning to work at IBM... Why wait until we're in IBM's predicament?