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Overloaded performance appraisals failing

15 February 2001 - Performance appraisal has become one of the most widely used management tools despite widespread criticism of its effectiveness. To add to the controversy, a new report from the UK's Institute of Employment Studies (IES) argues that many performance appraisal systems have a limited impact on overall business performance and fail both employees and organizations. The report - Performance Review: Balancing Objectives and Content - is based on research with nearly 1000 British managers.

According to IES Director Richard Pearson:

‘In theory, performance appraisal is a good opportunity to give feedback to employees and motivate them to improve their performance still further. In practice, appraisals can too frequently be stale, artificial or overloaded with bureaucracy. They are often dreaded by both managers and staff alike.’

Many organizations try to use performance appraisal and review as a ‘strategic lever’, not just for the performance of individuals, but also the performance of the whole business. However, report author Marie Strebler (an IES Senior Research Fellow) says:

‘This assumes that managers have the ability and motivation to make performance review work, by translating strategic goals into operational practice. Ideally, they should use the appraisal to help the employee see how their contribution adds value to the business as a whole. Too often, however, they are rushed discussions where performance ratings are handed out, where petty lapses in performances are picked upon, or where performance-related pay is awarded.’

Additionally, the report explains that performance review is rapidly becoming an 'over-burdened management tool'. Along with its appraisal and objective-setting aspects, line managers are expected to pinpoint staff training requirements, provide career counselling, identify future star performers and do something about poor performers. These are all important elements of people management but the attempt to do so much at the same time often leads to poor results from appraisal schemes.

Performance review systems are frequently rooted in the hierarchical organizations of the past, and often still drive pay or promotion decisions. Organizations are flatter today and there may be limited opportunities for upward progression. Rewards can also take forms other than pay increases. So, according to the report, new systems are needed that meet the requirements of individual organizations - text book models might not be suitable for particular strategies or structures.

The report advises a transformation of the performance review ‘from a beast of burden into a thoroughbred’. It recommends starting with business strategy, then being clear about the roles, skills and behaviours required for delivering that strategy. There are some simple rules:

* Clear aims and measurable criteria for success
* Involvng employees in design and implementation of the system
* Keepng it simple to understand and operate
* Making its effective use one of managers’ core performance goals
* Ensuring that employees are always able to see the link between their performance goals and those of the organization
* Using it to keep roles clear and focus on performance improvement
* Back up the system with adequate training and development
* Make any direct link with reward crystal clear, and providing proper safeguards to guarantee equity
* Review the system regularly and openly to make sure it’s working.

The report concludes that Human Resources functions that can deliver this will be making a real and visible strategic contribution to their organizations.

Performance Review: Balancing Objectives and Content, Strebler M T, Robinson D, Bevan S. IES Report 370, February 2001. ISBN 1-85184-300-0. £19.95

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