This article first appeared in DNA India on 6th, August, 2016.
Over the past year, there have been growing signs of discontentment with annual performance reviews. Some of the bigger organizations like Accenture, Adobe and Netflix had already scrapped their year-end appraisal process. And just this week, two recent news items about GE and Infosys doing away with performance appraisals got me thinking about the entire process. Before we get into these issues, let’s identify why organizations carry out performance appraisales. Annual appraisals are carried out primarily with a two-fold motive: to differentiate great from average performers so that they can be compensated fairly and to provide the feedback required to help employees to enhance their performance and productivity. Both these processes are important and necessary and it is only in the way that there are carried out that differences in opinions arise.
There are two angles to all the stories about organizations giving up performance ratings. One is about how grading people on a bell curve is bad and the need to give up on it. The second is about the need to give feedback continuously. In my opinion both of these are needlessly being conflated. Let’s take the issue of the bell curve. Statistically minded readers will recognize that the bell curve is not a cause but rather a description of how things are in nature. For the vast majority of distributions in nature, the bell curve is a very good approximation. So for example, in an organizational setting, one would expect that the performance of most of the people would spread out around the organizational performance mean with smaller numbers farther away from the mean (the exceptional performers and the underperformers ). While I agree that forcing managers to fit a preconceived performance curve, a Jack Welch-ish regimented, cut-off-the-tail system is fraught with danger, giving up on assigning some metric that differentiates the bad from the average and the great performers is throwing the baby out with the bath water. Many companies are moving away from a ratings system, but merely replacing a rating sytem by a points system is not going to help much. A ratings system, by any other name, would still classify people, to paraphrase the bard!
The key differentiator, in my opinion, is continuous feedback. Rather than carrying out the appraisal at the end of the year, continuous appraisals and more importantly, continuous feedback can help a person make those minute course corrections required to enhance productivity and performance. The overall impact would depend on the quality and nature of the feedback being given. The impact of constructive feedback, designed to help employees to improve cannot be overstated. Of course, putting a process in place is no guarantor of success. As we all know, feedback depends on both the giver and the receiver. We see wonder examples of both success and failure from Star Wars where the Jedis train their disciples using a Master-Apprentice relationship that is designed to enable continuous feedback and coaching. In Episode 1, we notice how Master Qui-gon Jinn gently pulls up young Padawan Obi-wan Kenobi when he makes mistakes, applauds him when he does something well and acts as a guiding light to him. A receptive Obi-wan grows as a result of the coaching and becomes a Jedi Master himself.
In Episode 2 Obi-wan, now a Master, tries to use the same technique with a young Anakin Skywalker. However, Anakin is a stubborn young lad who resents any criticism and this eventually leads him to the dark side of the force to become Darth Vader. Same process, two different results!
Despite these two extreme cases, it is good to remember that for every Darth Vader or Obiwan Kenobi, there will be hundreds of perfectly competent Jedis making up the ranks whose performance will not touch these two extremes. Statistically, the bell curve is a fairly ubiquitous distribution that has wide applications across domains and, whether we like it or not, is a good representation of the performance of our employee/Jedi population. How we use it to impact employee productivity is entirely a different matter. Hence, while giving up on a rigid inflexible system is good, don’t give up on the bell curve just yet.