In Favor of Ditching the Performance Review
Whenever the topic of getting rid of performance appraisals pops up in a gathering of business people, the strongest objections to change seem to come from HR people. They should start quieting those objections.
By Peter Cappelli
The one question on every HR leader's mind now is likely this: Should we dump our performance appraisals?
I hear it all the time in the United States now, and I just finished a tour of Greece, Dubai and Mumbai, and HR people there are talking about it as well. Last month, it was all they wanted to talk about in Singapore. The trifecta of PwC, then Deloitte, and now Accenture announcing that they are doing away with their traditional appraisal processes got attention around the world, even more so than the stories about substantial changes in practices at GE, Microsoft, Sears and so forth.
More companies than we imagined had dumped their appraisal process a while ago. I was recently told that one person's company had done it years ago when it discovered that supervisor ratings for customer-facing employees were uncorrelated with customer ratings of those employees. So why bother with the supervisor scores? they said. In every group of employers I've met around the world, at least one of them abandoned the process long ago.
But the recent move has really happened fast. If you believe in tipping points, efforts to rewrite performance appraisals in a fundamental way appear to be over it.
Two things about the general conversation about dropping appraisals worry me, though. The first is, everyone seems to be thinking about it -- it seems to me -- because everyone else is talking about it. I get the strong sense that, for many employers, it is just the thing to do rather than something that each company is thinking about in terms of whether it makes sense for them in the context of their own problems. A revealing fact about this "follow-the-leader" approach is the extent to which companies around the world are still looking to the United States for models in human resources, something that surprised me.
Here's the second thing that worries me. When I talk about the notion of getting rid of performance appraisals in a gathering of business people or managers, the strongest objections to change come from HR people. Perhaps that makes sense because we are the ones who understand what performance appraisals are designed to do, so we know enough to question how alternatives might work.
But performance appraisals are really unpopular. There is widespread evidence that, as traditionally practiced, they aren't working and the people giving them and the people receiving them hate to do them. I really don't think we want to be the people defending arguably the most unpopular practice in management.
The objections I hear also seem to have a stylized view of how well the appraisal process works now. "What if the boss is just biased and we get rid of appraisals?" Well, what happens now with appraisals? The evidence suggests that attributes of the individual doing the rating affect the outcome of the appraisal in a powerful way now. "What if you have to fire someone?" Again, what happens now? Managers duck identifying bad performers with formal appraisals.
For better or worse (probably worse), HR got stuck with the responsibility for the performance-appraisal process without the authority to make supervisors take it seriously. The best we could do is get them to tick boxes once a year. Now comes the possibility that we might lose that responsibility altogether. That doesn't seem like a bad thing to me.
The move away from appraisals is likely to create a different kind of workplace, and that may be all for the good. In the 1990s, we got obsessed with the idea that holding employees accountable for their performance was the big priority. The reason for that was the rise of the crazy "A player, B player, C player" model suggesting that poor performers would always be bad, so we should just find them and get rid of them. That model was never true. It probably reflected what is known in the social sciences as the Fundamental Attribution Error, attributing behavior to dispositions rather than circumstances. It also crowded out attention for the other tasks that the appraisal process was supposed to perform -- improving performance and developing employee skills.
The companies that are shifting away from the traditional performance-appraisal process are doing so in large measure because, for them, the goals of developing talent and improving employee performance have trumped accountability for past performance. That seems like a healthy direction. It would be a shame -- and likely a career-ending move -- for HR to stand in the way.
Peter Cappelli is the George W. Taylor Professor of Management and director of the Center for Human Resources at The Wharton School of the University of Pennsylvania in Philadelphia. His latest book is "Will College Pay Off? A Guide to the Most Important Financial Decision You'll Ever Make."