Performance management is the underachiever of the HR world. While it sounds good in theory, performance management hasn’t worked well in practice. Few believe in its effectiveness (though opinions diverge on what can be done to fix it). A lack of new ideas has caused some companies to abandon the process in frustration, but is giving up really the best approach?
Credibility is Key
Although performance management systems come in many forms, they overwhelmingly have the same basic flaws: poor use of incentives, lack of checks and balances, and minimal transparency. As a result, they’re rarely considered credible. Unlike, say, credit scores, there is generally no way to assess the accuracy and value of a performance evaluation simply by reading it.
Ask yourself, if someone was applying to you for a job and brought in a past performance assessment, where would it figure in your deliberations? Probably pretty low, if you even bothered to look at it. You simply don’t know if the assessment is credible. Contrast this with credit scores, which are trusted by merchants and instantly open doors to qualified buyers. One system is credible, the other is not.
To enhance credibility, process is everything, and the process must be both fair and transparent. In a research study from 1995, researchers found that when a performance management system established greater due process controls, employees rated their supervisors as more competent. This occurred even though these employees received substantially lower ratings than the control group.
Not Much Progress
Despite these 20 year old insights, companies and vendors have done comparatively little to focus on fairness, due process, and accuracy. Employees greatly appreciate fairness and fair systems, but performance management systems generally don’t bother. Instead, most systems give substantial, unchecked discretion to supervisors and management.
While managers often need broad authority to do their jobs, unconstrained authority works poorly in the context of performance management, because performance management is about creating fair, equitable appraisals. Since existing performance management software does not attempt to address this problem, each individual organization must figure out how to bring credibility and accuracy to its own system.
Unfortunately, organizations often have limited expertise in how to implement procedural fairness or have little time to focus on the problem. Even with the help of outside consultants, organizations find traditional performance management systems difficult to execute, fragile, and dependent on the continuing engagement and good-will of participants. In other words, traditional performance management requires a near perfect set of conditions to work.
The Impact
The result is that the vast majority of organizations have found it difficult to employ their performance management systems effectively. Instead, poorly designed systems decrease procedural fairness, reducing engagement and making the assessments themselves worthless. Low expectations for performance management are confirmed, reinforcing the belief that performance management never works.
This situation robs employees of fair feedback and an opportunity to use that feedback for both personal development and career progression. It also harms the organization by diminishing productivity and limiting management’s ability to make accurate personnel decisions.
Employees deserve fair appraisals, and companies harm their own interests when they fail to provide them. Performance management software is uniquely well positioned to provide the right incentives to generate fair outcomes, but without a drastic shift in perceptions, companies will continue to find performance management an impossible nut to crack.
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