Evaluation of the Effect of Performance Reviews

Deming (2000, p. 102) states in his book ‘it (performance reviews) nourishes short-term performance, annihilates long-term planning, builds fear, demolishes teamwork, and nourishes rivalry and politics’. Does Deming have a point? Is he entirely correct? What does a performance review really do to employees?

If organisations started doing away with performance reviews, what would we do? How would managers and leaders assess their employees and teams against the goals and objectives of the organisation? Cappelli & Tavis (2016) suggest there may be a change upon us with many organisations leading the way in a new revolution simply called – the performance management revolution.

Firstly, it is important to understand what is meant by ‘performance management’ and ‘performance reviews’. The Australian Human Resource Institute (AHRI) defines ‘performance management’ as an engrained, large-scale organisational process used to describe the exercise which drives decisions about individual, team, business unit and organisational performance as well as remuneration, promotion, disciplinary procedures, terminations, transfers and development needs within the organisation (AHRI, 2018). This is also supported in much the same way by the Australian National Audit Office (ANAO), an independent monitoring agency for government departments. To be effective in performance management, an organisation needs to ensure that it continually measures its progress against its own strategic goals and objectives. This is achieved by proper planning, implementation, stringent monitoring and continual review of their performance management system (ANAO, 2018).

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Not to be mistaken with performance management, DeNisi & Murphy (2017) explain assessing of employees’ performance in the workplace is a ‘performance review (appraisal)’. The topic has been of keen interest of executives, and HR professionals for many years. In recent times, there has been increasingly more interest in the way in which performance is managed. The two matters are most definitely related but in no way are they are identical. Performance reviews or appraisals are a process in which an employee meets with their respective line manager who has a formal discussion with each of their employees’ and rates their individual and sometimes team performance against key result areas/indicators in line with the organisational strategic goals and objectives. A score is normally assigned to the assessment, and this then advises the employee of their formal performance rating.

It is important to remember, managing performance, performance reviews (appraisals) and performance management all mean very different things, as shown in the video Talent Management 360: Performance Appraisal vs. Performance Management (2016) explores the differences between the two, supporting DeNisi & Murphy’s explanation. There are many misconceptions and views on what performance management is amongst organisational leaders. To outline these misconceptions, Bacal (2012) explains that performance management is not;

        Something a leader does to their employee

        A group of people to force employees to do a better job or work harder

        Only used when an employee is performing poorly

        The completion of a review (appraisal) which is only done once or twice per year

 Furthermore, in a world of intangible assets, a less than optimal workforce can provide fuel to an organisation’s demise. However, presently we are seeing more and more organisations manage employee performance badly and not to its full potential. The book titled The Workforce Scorecard argues that current management and human resources practices hinder employees’ ability to contribute to strategic goals. To optimise the strength of the organisation’s workforce, they must navigate through and overcome the following challenges: view the workforce from a contribution lens rather than a lens of cost; replace metrics of benchmarking with those that distinguish different levels of impacts to strategy; and ensure all leaders including professionals of HR collaborate together to execute organisational initiatives (Huselid, Becker & Beatty, 2005).

Much the same as explained by Cappelli & Tavis (2016, para. 4) ‘rethinking performance management is at the top of many executive teams’ agendas’. Cappelli & Tavis (2016) add there have certainly seen early adopters in this revolution with technology companies like Adobe, Juniper Systems, Dell, Microsoft, and IBM pushing the boundaries and setting new ways of how performance is managed within their respective organisations.

Taylor (2015) writes that Netflix has been a trailblazer in completely overhauling their performance management system and process, doing away with the traditional performance reviews. The HR department at Netflix simply asked their leaders to replace formalised performance reviews with having genuine conversations with their employees regarding their performance to be a part of their natural culture. Because of Netflix stopping formal annual reviews, they decided to replace these with informal 360-degree performance reviews.

To support Netflix’s approach to performance reviews, Buckingham & Goodall (2015) discuss Deloitte’s study of calculating the number of hours it took to complete the annual performance reviews, hold meetings and create ratings for employees estimating to almost 2 million hours is staggering. It’s no wonder, as confirmed by Cappelli & Tavis (2016, para. 5) ‘70% of multinational companies are moving toward this model, even if they haven’t arrived quite yet’. There is also research as seen on Reinventing Performance Management (2016) also do not give people the chance to use their strengths every day within the workplace.

Even though performance management systems, such as those implemented and used by Netflix are well received, designed and utilised and clearly seem to work, there have been concerns dating back to the 50’s surrounding a fear that leaders within the business have about ‘playing God’. Douglas McGregor, who wrote an article ‘An uneasy look at performance appraisal’ in 1957 suggested to solve this issue, the following was needed (as cited in Professional HRM Practices module 3.9, Bonias, RMIT, 2018);

        Employers should ensure there is a clear statement of the major features of a job that defines the broad areas of responsibility, jointly agreed by the manager and employee.

        Employees should establish their own specific short-term goals/targets, including the intended actions proposed to reach them, which are then agreed upon with the manager.

        At the end of the performance period the employee conducts a self-appraisal “substantiated with factual data”. 

        Managers and employees review performance together and reset targets for the next period.

 Similarly, Gallo (2011) writes there are fundamental things managers within organisations should do to help their employees succeed. The key is to have a hands-on approach whilst giving employees the autonomy to do a good job and be successful in the role they were employed to do. Gallo (2011) also states to;

        Connect employee goals to larger company goals

        Make sure goals are attainable but challenging

        Create a plan for success

        Monitor progress

        Assess and discuss when things go wrong, or goals aren’t met

        Replan for the future

 In a similar pursuit, if not the same as what Netflix did with their performance management system and process, an approach seen on the video titled Firing Line with Bill Kutik: Performance Management (2016), Accenture’s Chief Learning Officer Rahul Varma discusses the new wave of performance management they took describing it as ‘performance achievement’. This performance achievement culture is achieved by;

        Allowing employees to bring the best of who they are to any role they perform within the organisation, driving an employee’s own strengths & passion

        For employees to focus on key elements of their role that are vital to success – not the whole position description

        Be engaged with the team that you are a part of and engage with them

        Give and provide feedback in the moment, not in the past; and,

        Take note of actions to grow and develop and not label, rate or compare to others

 Varma also states in another video titled Performance Management: A Better Way (2016) that in his research, completed within 60 days, there is no direct relationship to performance management and actual organisational performance and 75% of the time, organisations were either documenting past performance to discuss again at a later stage and/or discussing with others behind closed doors, the performance of others – essentially talking about people to other people not with the people themselves. Likewise, Business Psychologist Andrew Sillitoe is seen on TEDx Talks: How to create a high-performance culture (2015) discusses and describes passionately that teams with purpose are more innovative, creating diversity and are more agile to organisations.

 There have been extensive studies conducted in 2004 by Professor Alan Nankervis Royal Melbourne Institute of Technology showing that of the 992 Australian organisations only 2.4% of these organisations conducted reviews on their employees against the organisational objectives and the remaining were some type of performance appraisal combination (People Streme, 2018).

 Furthermore, additional studies carried out by The Performance Management Institute of Australia conducted a survey of Australian employees’ attitudes towards Performance Management in the workplace. The survey showed the nearly 450 employees who responded from across industry and organisations that over 59% of employees received performance reviews once per year or less. Meaning a fair majority of Australian leaders within organisations were failing to talk to their people and effectively manage performance (People Streme, 2018). In the same way Varma discussed in his videos, continual setting of goals and reviewing how things are done, providing the necessary real time feedback to employees will give rise to organisational performance and achievement of mutually desirable goals. In addition, the application of Bolman & Deal’s (2013) human resource frame and as Oltman (2013) states for an organisation to reach its goals, it must do this by building relationships with their people and investing in ways that will enable growth and development for both the individual employee and the organisation.

 State Trustees – a public sector organisation has committed to its people and the community, to do things differently (State Trustees, 2018). Since 2010, State Trustees has been on a journey of major transformational change to be innovative in thinking and always looking at better ways to serve the community in which it serves. State Trustees has undoubtedly engaged and passionate people, who are driven and committed to delivering a good service and better outcomes for clients. This is what attracts people to the organisation and it is why most people stay. Employees at State Trustees are incredibly supportive of each other and are proud of the work they do for the community (State Trustees, 2018). In recent times, there has been a shift in culture at State Trustees – evident as the organisation utilises are culture measuring tool by Human Synergistics. Unfortunately, the shift has seen the organisation regress to more passive-defensive and aggressive-defensive styles, not the constructive styles that an organisation strives for.

 Presently, the organisation is experiencing tough times with its culture. Employees are feeling disenfranchised from the organisational goals, and from the organisation itself. Of late, since the release of the current culture results and a leadership group who are mostly acting in their roles, a concerted effort has been made to the organisation and its people to do things differently which are likened to Varma and Sillitoe, as discussed previously in this report and also to re-form the organisation from a human-resource frame (Bolman & Deal, 2013) – looking at workforce from an employee lens rather than a business lens.

Conclusion

It is safe to assume that many organisations are wanting or at least looking at changing their current performance management systems. Organisations which have chosen to use a balanced scorecard approach to bridge the gap between individual employee and organisational goals. It could be said, organisations are making a genuine concerted effort to introduce and implement a HRM strategy throughout their organisation in an attempt via improved performance management system. However, there has been a deterioration of satisfaction levels and current systems ever since these earlier studies, system user training has declined, and employee involvement reviewing their own and the team’s performance is not implemented well. Taking into account all studies completed previously and pointing out the guiding principles HRM professionals should utilise to develop their performance management systems, these would include but not limited to – alignment, integration, commitment, collaboration, feedback, outcomes, and user-friendliness (Nankervis & Compton 2006).

If according to Harvard Business Review’s Reinventing Performance Management (2016), up to 60% of Executives are questioning their performance management systems, we should be asking ourselves do we want to ‘annihilate(s) long-term planning, build(s) fear, demolish(es) teamwork, and nourish(es) rivalry and politics’ that Deming said all those years ago – one would think not!

References

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Australian National Audit Office 2018, Performance Management in the Australian Public Service, Australian National Audit Office, viewed 4 October 2018, <https://www.anao.gov.au/work?query=performance+management>.

Bacal, R 2012, Manager’s Guide to Performance Management, 2nd edn, McGraw-Hill, New York, US.

Bolman, L. & Deal, T.E. 2013, Reframing Organizations: Artistry, choice and leadership, 6th edn, Jossey-Bass, San Francisco.

Bonias, D 2018, ‘Professional Human Resource Management Practices, module content, BUSM4589, RMIT University, Melbourne.

Buckingham, M. & Goodall, A. 2015, Reinventing performance management: How one company is rethinking peer feedback and the annual review and trying to design a system to fuel improvement’, Harvard Business Review, vol. 93, no. 4, pp. 40–50, viewed 27 September 2018, <https://alertlogic-hb4e.hbsp.harvard.edu/api/courses/404153/items/R1504B-PDF-ENG/sclinks/79e3126a649fa09898f7fc5f87bb5a85>.

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DeNisi, A. S., & Murphy, K. R. 2017, ‘Performance appraisal and performance management: 100 years of progress?’ Journal of Applied Psychology, vol. 102(3), pp. 421-433, viewed 28 September 2018, <http://dx.doi.org.ezproxy.lib.rmit.edu.au/10.1037/apl0000085>.

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McGregor, D. 1972, ‘An uneasy look at performance appraisal’. Harvard Business Review, vol. 50(5), pp. 133, viewed 5 October 2018, RMIT Library database.

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Oltman, H., 2013, Reflection 5: The Human Resource Frame, Step Up – Be a Leader, viewed 29 September 2018, <https://blogs.baylor.edu/haileyoltman/2013/03/27/reflection-5-the-human-resource-frame/>.

People Streme 2018, What is Performance Management? , People Streme, viewed 3 October 2018, <https://www.peoplestreme.com/videos/what-is-performance-management>.

Performance Management: A Better Way (2016), YouTube, 28 July 2016, viewed 6 October 2018, <https://www.youtube.com/watch?v=B-vszzxmcF8>.

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